September 14, 2008 10:04 pm

‘Never despair,’ advises the former sage of F&C

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“I didn’t think anyone remembered me any more,” says Michael Hart, standing at the door of his substantial period home deep in the Essex countryside. He is surely being modest. Mr Hart was the undisputed investment pin-up of his day. Good-looking, successful and a champion of the retail investor, Mr Hart’s profile was as high in the 1980s as Anthony Bolton’s was to become in the 1990s.

At the height of his fame, 500-plus investors would flock to hear the manager of the Foreign & Colonial Investment Trust give his views on global markets at his annual general meeting, while political leaders and businessmen from around the world would queue to lunch with him.

As manager of the F&C trust from 1969 to 1997, Mr Hart presided over an increase in assets to £2.3bn (€2.8bn, $4bn) from £180m, making it the world’s largest investment trust. Over the same period, the share price increased from 8p to 160p. Mr Hart’s stewardship of the trust gave F&C an enviable profile that, since his departure, it has not managed to build on, despite creditable performance by his successor, Jeremy Tigue.

The gains during Mr Hart’s tenure were made in spite of setbacks such as the 1970s oil shock, the stock market crash of 1987 and the depression of the 1990s, and make Mr Hart, now 75, particularly qualified to dispense advice on how to invest in the kind of turbulent market that prevails today.

His main recommendation? Never despair. “I guess I started out as a naive optimist and never really changed all that much,” he says. “In 1974 stocks fell so far and so fast that everyone lost hope. But panic creates great opportunities and towards the end of the decline I presented a list of stocks I wanted to buy to the board. They were blue-chip stocks at bargain basement prices, so we agreed I would borrow some money and take a big bet on them.”

One such “bet”, a £300,000 investment in GEC, was worth £3m six years later. A number of similar bets, often involving less-known names, also paid off as Mr Hart learned to take calculated risks within a well-diversified portfolio.

But perhaps his biggest gamble was the purchase of his own house in 1973 during a housing market downturn that made the current one in the UK, US and Spain look like a mild inconvenience. Desperate to buy the house he currently lives in, but unable to sell his old one in a static market, he offered the owner – a judge who had been given a new posting – a 20 per cent downpayment and the rest within 12 months. That gave Mr Hart just a year to sell his old house or be forced to service two large mortgages. Luckily for him and his family, the market turned just in time. “I was sweating as the 12-month deadline approached but then a buyer suddenly appeared and I was off the hook,” he says.

However, Mr Hart characterises his investment style overall as “low risk”, saying his approach was to “nibble away” at stocks rather than take large positions all at once. He is sceptical about current hedge fund trading styles and strategies although he is, as ever, diplomatic in his assessment of them. “There are some brilliant chaps now, hyperactive many of them. I was a bit dull and boring in comparison, more the steady type,” he says, adding that he has never been tempted to invest in hedge funds. “I don’t like the high fees and I can’t invest in something when I don’t know what they are doing.”

His practical investment philosophy reflects his low-key entry into investment management: he left school at 15 (“I was only ever good at sums, but that’s all I needed to be a fund manager”), became a chartered secretary and only got his big break because the manager of the trust fell out with the chairman and he was in the right place at the right time.

But he quickly established his own style and helped changed the way investment funds operated.

He put emphasis on overseas shares, not just domestic companies; he met company executives, which was virtually unheard of in the 1970s; and he set up the first savings schemes for investment trusts. Typically, he is most proud of the last achievement since it gave ordinary people greater access to the investment world. He says: “I got the idea from the US and didn’t think it would be legally possible in the UK but it took off and there are now 100,000 people who save like this.”

Although he was a poster child of his generation, Mr Hart did suffer disappointments in his career. A handful of investments were ill-judged, such as the disastrous purchase of Eurotunnel shares. And his career ended in acrimony: a popular and respected figure, he was appointed as director general of the Association of Investment Trust Companies in 1998 after stepping down from his main F&C role. But he lasted just two months before he felt compelled to resign over a row with shareholders in an F&C Brazilian small companies trust of which he remained a director.

The criticism he received was crushing: “I felt terrible, and got really depressed for two or three years after that.”

However, his memories are largely happy. He was proud to have attracted the likes of Warren Buffett and Tony Blair to his dining table. Mr Buffett confided he loved investing so much he rose from bed every day “and felt like tapdancing”.

One of the few luminaries to refuse an invitation was Gordon Brown. “Unfortunately, he didn’t seem interested in the subject at all,” says Mr Hart.

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