Face to Face

February 9, 2014 9:03 am

Richard Buxton: ‘I don’t see myself as a star fund manager’

Richard Buxton

Richard Buxton is a star. He is one of those precious commodities in the fund management business – a big name; someone who can attract clients by virtue of his own brand.

Neil Woodford at Invesco Perpetual, Anthony Bolton at Fidelity, Bill Gross at Pimco and, of course, Warren Buffett are other big names. But they are rare, particularly in the long-only world.

Being a star is not something that sits easily on Mr Buxton’s shoulders. He is reluctant to promote himself and tends to shy away from press interviews. This is one of his first since he shocked the City and quit Schroders last June to join Old Mutual Global Investors, the UK asset management arm of Old Mutual, the international investment and banking conglomerate.

“I don’t see myself as a star fund manager,” he says. “The stock market is a mechanism for humility. If you think you are a star, then you fail. You are only as good as your last game and only the paranoid survive. The only thing nice, in inverted commas, about being a so-called star is that it opens doors, not just to the management of companies but to, for example, the Treasury or the Bank of England.”

His name has certainly helped attract and retain clients. Since announcing his appointment in March, the Old Mutual UK Alpha Plus retail fund has grown from £160m to £1.1bn, taking about £500m from his old fund at Schroders, which was worth £3.8bn at the time.

Performance helps business too. Over the past year, he has delivered 10.5 percentage points above his benchmark index, the FTSE All Share, propelling his fund into the top quartile among UK retail equity managers. But it is not just about one year’s results. He has been one of the top-performing asset managers since he first launched the alpha fund at Schroders in July 2002, returning 12 per cent a year on average and outperforming his benchmark by an annual average of 4.4 percentage points.

A fixture of the British fund management scene since he left Oxford university and started his career at Brown Shipley Asset Management in 1985, he left Schroders because he wanted to work for a smaller company where he would have more influence. Schroders is Europe’s second-biggest independent investment group, with just over £250bn in assets under management, compared with OMGI, which has £16bn under its control.

“I had been at Schroders 12 years and I wanted a fresh challenge,” he says. “My fund was 6 per cent of AUM at Schroders, so I wasn’t sure I was making a difference, whereas here I can make a difference, helping to build a business.

“We want to build a much bigger operation in the UK. We want to build up a big asset management franchise. We are smaller but we have ambition. I felt that, at this time of my life, I had one more job in me before I retire.”

He is 50 on March 21, the first day of spring, and considering he worked at Schroders for 12 years and at Barings for 11 years before that, OMGI is likely to be his last job before he turns off his Bloomberg screen and calls it a day. He also likes the greater flexibility a smaller operation offers, particularly as he expects 2014 to be a year when talented active managers will shine.

“There is going to be more of a transition in monetary policy this year. You are going to get more Fed tapering, with the anticipation of possible US rate rises. Bond yields are likely to grind higher and it will be a more testing time for equities. There may be more volatility, but that is no bad thing. It provides an opportunity for the smart active manager, particularly if you are prepared to hold a stock for a long time and withstand the heat while they are out of favour.”

This ability to stay calm and not rush for the exits at the first sign of volatility, as some retail investors have done in emerging markets in recent weeks, is critical for success, he says.

“The last new stock I bought was Aviva [the FTSE 100 insurer] in September. I only have 35 stocks in my portfolio, which I choose carefully and stick with for the long term. There is very little turnover. I only buy about four stocks a year and then hold them for a three to five-year time horizon. It is important not to panic-sell.”

His strategy is to buy with a certain theme in mind. The renaissance of financial stocks has been one theme that has paid off in the past five years. He has made a lot of money for clients by buying the stocks of Royal Bank of Scotland, Barclays and Lloyds Banking Group when they were languishing at the lows in 2009.

“The banking sector has outperformed the market every year since the financial crisis, except for 2011. We have made some good money out of banking stocks. We have also made some good money in the life companies such as Resolution, L&G and now Aviva.”

Another important ingredient for success is meeting and understanding the managers of the companies you plan to buy.

“You need to spend time with management, assess their strategy, look at their incentive arrangements and then build up a relationship with them. For me, being a good fund manager is about backing companies on a multiyear timeframe and then sticking with them.

“My job is the antithesis of the trading game at a bank, which is a young man’s game and why they burn out. I believe experience counts for a lot in fund management. Some of the best fund managers tend to be older and more mature like me or Neil Woodford [aged 53].”

It is this ability to stick with stocks, even in the tough times, and the development of relationships with clients and a company’s management team over many years that is essential for producing consistently high returns above the market average and benchmark, he says.

Indeed, it is this long-term strategy that has helped him become a star, although he is too humble to say so himself.

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Curriculum vitae

Richard Buxton

Born 1964

Education

1982-85 English, University of Oxford

Career

1985 Fund manager in fixed income, then equity at Brown Shipley Asset Management

1990 UK equity manager, then head of UK equities at Barings

2001 UK equity manager, then head of UK equities at Schroders

2013 Head of UK equities, Old Mutual Global Investors

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Old Mutual Global Investors

Founded 2012

Assets under management £16bn

Offices Three, in London, Hong Kong and Boston

Employees 177

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