Rare steak, velvety Malbec and a catch up with Brown Shipley’s fund analyst and multi-manager Simon Nicholas was on the menu for me this week, as we headed for lunch at Gaucho in the City, writes Anna Dumas.
Gaucho, the ever-growing Argentinian themed franchise, prides itself on the fact that it does one thing and does it well; serving steak.
Nicholas, who has been working purely in fund selection for the best part of 15 years, could be described as following a similar ethos. Tucking into red wine and ribeye, we discussed the benefits of having a fund-focused investment team.
‘There aren’t many of us doing it, but my personal belief is that if you’re a seriously good stock picker then you’re running a unit trust somewhere, not dividing your time between that and working directly with private clients, which can be time intensive,’ Nicholas told me.
He therefore works alongside Alex Brandreth to construct a carefully researched internal buy list, the core of which also forms Brown Shipley’s multimanager funds, whose performance Nicholas describes as being particularly effective as ‘shop windows for the strength of our analysis’.
Nicholas’s research responsibility leans towards finding new entrants to the portfolio, so I asked how he sets about analysing a new fund, and whether it is more important to talk stocks or style with a manager.
‘When it comes to analysing a fund I don’t spend too much time looking at specific stocks,’ he said. ‘I’m much more interested in process and the manager themselves, I want to know how they add value through their style and process so that I have a good idea of how the fund will react to different market conditions. How a fund behaves as a single entity is key.’
He went on to explain why he places so much emphasis on meeting managers face to face.
‘Quantitative analysis works as a very effective screening process but it has its limits in that it’s inherently backward looking. Forward planning comes at the qualitative stage and that kind of analysis can only really be achieved face to face, you need to understand exactly how a manager operates and what he’s likely to do in specific circumstances.’
To this end, Nicholas met with more than 200 managers in 2013, a significant undertaking but one he remains philosophical about.
‘It takes time and effort to get to know a manager. Your macro calls are only as good as the managers you select to play them out.’
One recent call in particular exemplified this point, he said. ‘Being bullish on Japan drove a good deal of our performance last year and I expect that trend to continue – earnings are still positive.’
He added: ‘It takes someone who really understands change and the culture to be able to make a success of that market. The managers we use have serious local expertise and are therefore well placed to make well informed forward looking calls.’
Forgoing coffee as, true to form, Nicholas had another meeting to get to, I quickly asked whether he had ever considered another career, or if it was finance from the start?
‘I was always heading towards something numerate so [working in] the City made sense really. At the time, my real passion was actually to be a racing driver!’