Weekend press review: Foxes and hedgehogs

by | Apr 30, 2018

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Foxes versus hedgehogs

Top pick from the weekend’s offerings from the Financial Times is a thought piece from Maike Currie, an investment director at Fidelity International, who compares the relative merits of foxes and hedgehogs. Not so much their animal virtues, you understand, but rather how their instincts relate to success in the fund management world.

Confused? So were we at first, but Currie’s argument has a lot to teach us and is well worth reading in full. We won’t spoil her thunder here, but she begins with the observation that the philosopher Isaiah Berlin, drawing on ancient Greek wisdom, divided the world’s great thinkers into hedgehogs and foxes. Foxes, apparently, know many things, whereas hedgehogs know only one thing and stick to it for the medium or long term.

And so to how the theory applies to fund managers. On the one hand, Currie says, there are eminent hedgehogs such as Nick Train or Terry Smith who stick to a basic principle and who have often been well rewarded for it; on the other, there are the foxes who rarely stick to one strategy for long and who live on their wits, according to the needs of the moment.

As advisers, we are strongly tempted by the hedgehogs, not least because they have “a story” to tell our clients. And, as Currie notes, the Smiths and the Trains have had a good run in recent years. But the market is now moving toward “the end of the cycle” (Currie’s words, not ours), a situation in which “foxes could do well, exploiting inefficiencies, finding bargains or at least those securities that can do better than the benchmarks.”

It’s a familiar theory, but very well presented here. Well worth checking out the article in detail.

The Mail reports on the CBI’s latest report on the prospects for economic growth in the light of failing consumer confidence and slower retail activity. Perhaps unexpectedly, it says, the sharpest slowdowns have come not in high street retailing (which is itself reeling from a string of closures at Toys R Us, Maplin and so forth), but in consumer services. A trend which, in the words of CBI chief economist Rain Newton-Smith, confirms that consumers feel “under pressure from anaemic wage growth and elevated inflation.”

The upshot of all this, the Mail says, is that it would be surprising if the Bank of England chose to raise bank rates during May. A point which has not been lost on the money markets, which marked sterling down sharply last week.

“While growth is expected to pick up,” he says, “for the UK to catch up with the global recovery, we really need to solve the UK’s sluggish productivity…..Companies can learn from each other and lead their teams in adopting readily available technologies and management practices, to get to grips with this deep-seated problem.”

The Sunday Times Money section leads with a warning to those buying property to make sure they take care to avoid what is termed “Friday afternoon fraud” – ie where house buyers and sellers fall prey to scammers who strike on what is usually the busiest day for completion deals. By hacking into emails (or even using social media) the scammers find out what’s happening and impersonate the solicitor or client – saying the bank account details have changed. You can guess the rest of course. Tips to help avoid this are to never send bank account details by email and if phoning, use the number you are certain belongs to the firm and not one sent by email. Also the idea of sending a test of £1 to the account to secure confirmation it’s the right one, makes some sense.

There’s also a two-page spread looking at the week of chaos for many people brought about by problems when a new IT system was installed at TSB. The bank’s communication strategy is heavily criticised as TSB braces itself for big fines. However, there is a warning that with other banks due to regulator’s instructions to split their core units from other parts of the business like investment banking, there may be more trouble ahead.

Never sell Shell? It’s that old adage on Ian Cowie’s agenda in his Personal Account column. With a  5.5% dividend yield, the attractions of investing in shares of the oil giant are discussed and debated. Both Paul Niven (of F&CIT) and Richard Buxton (OMGI) hold the stock and are quoted in the article as believing that the dividend is relatively safe. Finally, following the Shell discussion, Cowie issues a reminder to readers that they can avoid IHT by reducing the value of their estate by spending some of it now – even if the kids might not thank you for it!

In this week’s Fund Focus, the Financial Mail on Sunday has the Pictet Nutrition fund ( formerly known as the Agriculture fund). Jeff Prestridge describes Geneva based Pictet Asset Management as “not your typical investment house”.  This is due to the fact that it operates as a partnership and also goes about its investing in a thematic way rather than on a geographic basis.  As the MoS reports, the fund’s portfolio has been overhauled to reflect the greater emphasis on investing in companies which are helping improve the quality of food. Manager Cedric Lecamp  says that he is “…looking for companies that are helping produce healthier food and reducing food wastage both in the production process and when it arrives on the shelf.’ The buzzwords for Lecamp are ‘quality, access and sustainability’

Prestridge comments that “any suggestion that the fund is based more on marketing hype than investment potential is washed away by two key facts.  First, all potential investments are screened by third party the Access to Nutrition Foundation for their commitment to delivering healthier food products. Secondly, while Lecamp dictates the fund’s holdings, he also draws on the knowledge of key nutritional experts. They are part of an ‘advisory board’ whose role is to help Lecamp identify emerging nutritional themes. Apparently enzyme technology is currently the rage although Lecamp and his advisers believe personalised nutrition – tailored nutritional advice – could be the next big theme to take off.

Like the Sunday Times, The MoS Moneymail has a detailed report on the TSB debacle, and looks at what might lie ahead for the troubled bank as it faces up to the costs of the problems caused to so many customers through problems in changes to its IT systems. What will happen to Chief Executive Paul Pester is the subject of much of the debate. With many customers seemingly still having some problems, it seems as though this saga has further to run.

Meanwhile, the Sunday Telegraph Money section looks at “Stamp duty loopholes: how to cut your tax bill.”  It says that landlords could save tens of thousands of pounds in stamp duty by exploiting a little-known loophole that involves buying several properties at the same time.

The Telegraph reports that for transactions that involve six or more properties stamp duty is charged at 0pc for the first £150,000, 2pc for the value between £150,001 and £250,000 and 5pc for anything above this level. This, it says, compares favourably with the usual tax a landlord would be charged, where the marginal rate is as high as 15pc on properties worth £1.5m or more . However, these are hardly mainstream ideas and advisers who want to know more can read the Telegraph article to get the details.

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