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Profile: from Batman Live to commodity beta

Profile: from Batman Live to commodity beta

Boutique fund and wealth management house Charteris may be a family affair, with two generations of co-founder Ian Williams’ family under one roof, but the company has absolutely not gone sentimental.

‘Ian doesn’t remember this,’ says his son and company investment manager Mark Williams, 'but the day before I joined he took me to one side and said “if this doesn’t work out, I will fire you”.’

Almost a decade on, and the risk of frosty domestic exchanges over the breakfast table appear diminished – especially after a bumper 2016, which witnessed the bantamweight group beating some of the UK’s heaviest of heavyweight asset managers in some of the most hotly-contested fund leagues.   

Both Williams senior’s Charteris Gold & Precious Metals fund and colleague Terry Farrow’s Global Macro fund topped their respective Citywire league tables, while Williams’ Premium Income mandate missed the very top of the UK Equity Income scoreboard, but fell within the top five.

Over the calendar year the Gold fund returned 132% versus a peer return of 94.3%, while the Macro fund returned 32.2% versus 6.1% and the Premium Income 17.7% versus 8.4%.

While obviously still the early days of 2017, that hot streak has yet to break, with the mandates holding onto their premium returns throughout January.  

All three funds have caught a strong following wind – and a chunky component of beta momentum – from the commodity recovery with the Income fund, for instance, holding 30% of assets in basic materials, twice its reference index, and 15% in oil and gas, or three times the index weight.

While the Macro fund does not disclose benchmark-relative sector exposure, its top-10 allocation features many of the same names as its sister mandate, with both heavily invested in UK-listed, globally active resource mega-caps such as Rio Tinto, Royal Dutch Shell, BHP Billiton and Antofagasta.

The 2015-launched Macro fund does not yet have a long performance history to reference, but the Income fund’s track record still appears to carry the scars of a years’ long battle with the commodity bear, with last year’s bumper outperformance directly preceded by several consecutive years of fourth-quartile returns.

Nonetheless, the house insists that the retracement of 2016 was not a simple mean reversion, and that even a moderate uptick on commodity demand from recent levels could offer an extremely powerful multi-year lever on performance.

‘At the beginning of 2016, we were looking at mining stocks which on some measures, were at the same sorts of levels they reached in 2008,’ says Williams. ‘At the same time your Reckitt Benckisers and Unilevers were at multi-year highs, while the mining sector had been killed, following the biggest bear market in precious metals for years.  

‘Ian has done a lot of underlying technical analysis, which points to the next peak in gold arriving in 2020/21. Which makes intuitive sense; after one of the biggest bear markets in history we may now be in for a multi-year bull-run.’  

This is the point where potential buyers of Charteris’ funds are likely to bifurcate into the sympathetic, and those who find themselves violently allergic to the idea of charts rooted in mediaeval crop rotations and tidal flows; a division the company is happy to accept on a Marmite principle that partisanship is a more powerful force than indifference (‘Some people do roll their eyes,’ admits Williams ‘But for every one who does, another gets interested’).

In a presentation on the precious metal fund last month, hosted on the Charteris website, the company drew on an apparent 40-year pattern of inflation-adjusted cyclical peaks in gold prices, and a shorter-term seven-year cycle in silver prices, to show the patterns coinciding at the end of this decade.

This was supported by a qualitative assessment of the basic supply/demand dynamic, the company wrote. More than a third of silver is produced as a by-product of base metal extraction currently experiencing a generational handover, as older mines reach the end of their useful lives. 

‘As Anglo American and Glencore (and others) close down all their old dinosaur (and unprofitable) lead and zinc mines, it will take a huge amount of silver supply off the market – to the benefit of the primary silver producers. According to various specialist industry analysts silver is already in a supply deficit (estimated 50 million ounces for 2016) even before this occurs.

‘Forecasts of the cutbacks vary from analyst to analyst dependent on how much capacity is closed (and how quickly) but estimates of 100 million to 150 million ounces are being discussed. This is out of a total silver mine output of 870 million ounces.’    

The turning point of the last year has taken Williams junior through a full market cycle, having joined on Halloween 2008, shortly after the government had bailed out the stricken banking sector.

‘The first day I was in the office was spent asking whether all the screens were supposed to be red,’ he deadpans.

While the family firm was far from his first experience of the finance sector, having interned at WH Ireland in his youth and worked in administration at Croydon-based fund of funds manager Forsyth Partners after leaving university, Williams took a circuitous route into the business.

To the best of our knowledge the only Wealth Manager cover star with an IMDb listing, Williams left Forsyth when he got an offer too good to refuse. ‘I did drama and TV production [at university] and had some aspirations to be a thespian. I was in a touring show, which was when I got spotted.’  

The person spotting him was Robin Hardy, director of the British cult classic the Wicker Man, who at the time was eagerly working on pre-production of ‘spiritual sequel’ the Wicker Tree, which he hoped would correct the record following the ‘bastardisation’ of his vision by a universally-derided Nicolas Cage remake.

In addition to a speaking part, Williams’ production experience meant he took a wide-ranging role in the backroom business of translating the script onto screen.

‘We went driving across Scotland, scouting for locations, looking for places which could fit into the screenplay. ‘[The original] is huge in that part of the world, people are very proud of it and they hold an annual Wicker Fest, which we visited and ended up casting local people.

‘Obviously you are all together on set, the acting and production team, and the first time you all go for a drink to get to know each other, you are walking around thinking “I know that person” and “what are they from”. And then Christopher Lee [who starred in the original and who cameos in the sequel] turns up and you’re like “well I know who that is”.  

‘When you see what a major part of people's lives it is, it’s a great feeling to be part of something like that. Even if the premier wasn’t in Leicester Square, there was still that moment of looking up at the signs outside, and thinking I was part of that. It’s not like making a student short.’

While the sequel did not quite replicate the cult impact of the original (The New York Times' reviewer said ‘it was not as gritty as the original Wicker Man but it's a thousand times better than the remake.’ Hardy told the Guardian: ‘I was quite happy with that’) it still acted as a calling card. But after being passed over in the second round of auditions for the role of Robin in the world-touring stageshow Batman Live, Williams decided it was time to find a day job.

‘Sadly gas, electricity and internet bills arrive monthly, almost like they need to be paid regularly. I got through to the second round on acting ability, but was clearly not the person for the gymnastics.’  

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