Robin Hepworth has worked at Ecclesiastical since 1988. He is the only fund manager in our list with an explicitly ethical focus. The focus of the strategy is on engaging in firms for change and the business has many church clients. Hepworth is a keen walker and footballer; he climbed the Lake District’s 24 peaks in 24 hours.
Ecclesiastical Amity International
1. What is the investment decision you are most proud of making over the past decade?
Buying Fenner (a distinctly unglamorous rubber products company) in 2003 at their cyclical low demonstrated that investing in ‘out of favour’ companies that remain intrinsically strong, is a good investment discipline. Repeating the exercise at the companies next cyclical low in March 2009 (both purchases became 5 baggers), perhaps goes to show that investment requires a degree of good fortune as well as diligence!
2. And which was the worst clanger and what did you learn from it?
Buying HMV after the shares had fallen 70%, the balance sheet appeared robust and the worst of the impact of the internet was behind it. Lesson learnt: having profited from eschewing technology stocks at the turn of the millennium, I then seriously underestimated the devastating impact of the internet in specific sub sectors of the retail economy.
3. What is your most crucial principle of successful investing?
Be contrarian. Do not follow the herd, take a different (and sometimes opposite) view to the consensus.
4. When you think about the past decade what were the most formative events for you?
The rise and fall of the TMT bubble which then left a massive opportunity in value stocks in 2003. The folly of the Bank of England’s MPC in reducing interest rates every time there was a mini crisis, resulting in a massive debt and property bubble, which will takes years to eliminate.
5. You had to cope with the credit crunch in this decade so have proven an ability to deal with the good times and the bad. What’s the key to weathering a really tough market period?
Timing market peaks and troughs is a difficult task. For long term investors like myself, the ability of companies to prosper throughout the economic cycle is vital. Therefore identifying a long term track record of balance sheet strength is key.
6. How do you believe the investment world has changed over the past decade?
On a positive note, the quality and quantity of financial and business information has improved particularly for environmental, social and governance issues which I believe are vital factors in identifying the long term sustainability of a company’s future profits.
7. When you look ahead what is the most exciting investment opportunity you see?
It appears probable that China and Asia as a whole will continue to drive global growth for many years. Balance sheets of governments, corporates and consumers are solid. The Asia Pacific region is under-represented in global equity indices compared to its economic weight. Valuations look attractive; in a reversal of previous historic trends, Asia now offers a yield above the global average and a trailing PE of 10 times. With most global fund managers remaining underweight, it also remains a contrarian play.
8. What is the greatest risk you perceive to your portfolio in the months and years ahead?
The greatest risk facing my portfolios is that the US stock market, which now accounts for over 50% of the World Index, continues to outperform. Overall I sense there are considerable risks retaining such a high weighting to the US given its mediocre economic outlook, unsustainable fiscal position and downside risks to profit margins.
9. If you could change one thing about the City what would it be?
The banking sector is as large a threat to our economic well- being as it was before the crisis. It must be split up into parts that cannot individually be too big to fail. This should also lead to a significant reduction in the obscene levels of bank executive remuneration.
10. If you could give one tip to young fund managers hoping to emulate your success, what would it be?
Success in investment is not a highly scientific process. There are no universal truths. So use your judgement and probability analysis and always be open to new ideas.