In a series of personal profile interviews we’re getting to know the people behind some of the most well-known investment names in the industry. This time we hear from the renowned fund manager Richard Buxton, about his career highlights and regrets and what he sees as the biggest opportunities and challenges for investors.
What’s the best piece of advice you’ve received?
Early in my time in the City, I was encouraged to be infinitely curious – to take up any opportunity to meet or spend time with any company whatsoever, irrespective of size or sector, in order to learn more. Trying to understand different industries, companies and meet an array of different managements was very good advice. As the world changes, increasingly through disruptive technology, this need to be curious about changing business models, new ways of working, remains absolutely key.
Which investment decision are you most proud of?
I have always been good at buying during complete panics or bear market gloom. One highlight was buying Reuters in 2003, before it subsequently rose ten-fold, and then selling what had by that stage become Thomson Reuters. The 2008 meltdown provided some extraordinary opportunities – buying Burberry below 200p, or Next at 850p are etched in the memory. But I’ m probably most proud of a sale: Tesco, in May 2010, at 425p, as we could tell it was all going to go horribly wrong…
Do you have any investment regrets?
More than you have given me word count for! Huge missed gains through being ‘penny wise, pound foolish’ over buying prices. The lure of a slightly offbeat investment against a more familiar, proven business. Never back even the best collection of company managers with a war chest to seek acquisitions – they’ll inevitably overpay, or bad assets will find them. I have long since overcome the temptation to bank a short term gain in an investment I believe in for the long term. The question now is whether I am too patient with companies facing short-term headwinds.
What do you see as the biggest challenges for investors in the next few years?
We remain in uncharted territory, looking to unwind the enormous post-financial crisis stimulus. How this ‘normalisation’ plays out will be key to returns over the next few years. If the world does continue to heal, then markets can live with gently rising bond yields, and they should be able to deliver profit-driven returns. Any slowdown or event-driven hit to fragile corporate sector animal spirits (and one can list many such potential ‘events’…) would, I think, threaten this scenario.
The challenge then is that the policy response options are increasingly few. Massive fiscal stimulus? Full debt monetisation? Nine years on from the financial crisis, the argument that debt, demographics and technological change condemn us to a ‘new normal’ of pedestrian growth rates is universally appealing. But if we are simply halfway through a 20-year recovery process, maybe it is too soon to write off a return to pre-crisis growth rates by the middle of the next decade.
And the biggest opportunities?
Given the degree of stimulus in recent years and consequent asset appreciation, there are few glaringly cheap opportunities out there. I think UK banks remain an outstanding one, though – and I am encouraged so many investors regard them as ‘un-investible’. A company like Lloyds has raised all the capital regulators require, is coming to the end of its penalties for legacy issues and customer redress, is massively cash and capital generative – and is committed to returning most of that to shareholders. We can envisage its dividend growing over time to around 6p a share against a share price today of 66p. In today’s income- and yield-hungry world, that strikes me as the wrong share price!
If you were giving a family member one piece of investment advice, what would it be?
Start regular savings for the long term – into long term assets such as equities or a balanced fund – as early as you can, even if only with modest sums. Increase what you put away as often as you can, even if you feel the pinch a little bit. As the actuaries point out, you can never get back lost years of saving for the future at a later date and hoping to ‘make up for it later’ is the triumph of hope over experience. Oh – and make a will. It is amazing how many people put that off too, until it is too late.
Outside of investments, what’s your dream job?
I love words and language, and remain an avid reader. If I weren’t doing this, I think I would have to test myself and see if I could write something.
This interview is one in a series we’re running with well-known investment commentators. We also recently heard from Andrew Milligan, Head of Global Strategy, at Standard Life Investments.
Richard Buxton is Chief Executive Officer at Old Mutual Global Investors.
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