In this new series of profiles, we ask leading fund managers to reveal everything from their investment strategy, to their views on cryptocurrencies, famous business leaders they look up to, and what they’d never invest in.
Our first interviewee is James Thomson, manager of the Silver-rated Rathbone Global Opportunities Fund.
1. What’s your investment strategy?
We’ve always looked for under the radar, out-of-favour growth companies that, crucially, demonstrate resilient growth. These companies are shaking up their industries; they under-promise and over-deliver and offer something different that is difficult to copy.
2. Which famous investor or business leader do you look up to, and why?
In terms of inspirational figures in business, it would be Jeff Bezos. He is willing to make decisions, based on imperfect information, and accept mistakes. I also believe he is happy to commit and support his team, despite initial reservations with an idea. These are all qualities that I find inspirational.
3. What's your favourite forever stock(s):
I guess it follows that it would be Amazon (AMZN), which is constantly evolving and increasing the size of its addressable market. Remember, Amazon started in the 90s as a bookseller, and that platform was used to enter different areas of retail. They also entered cloud computing before it was even a market.
4. What would you never invest in?
Commodities. The main drivers, such as the price of the underlying commodity, for example, are out of anyone’s control, and is notoriously difficult to predict.
5. Growth or value?
Growth.
6. House or pension?
Pension – I don’t own any buy-to-lets.
7. What are your thoughts on crypto?
Quite simply, this is not an area in which we invest: it’s too early stage, too speculative and we don’t have the expertise. I’ll leave it to my nephew!
8. Which sector provides the biggest investment opportunity in 2021, and why?
In the short term, industrials will benefit from reflation and reopening. Right now, we’ve a rare confluence of events, consisting of very high levels of demand as customers rebuild inventories, meeting very lean and athletic cost structures. Those costs have been chiselled to the bone, so coupled with previously anaemic demand, we could see a very powerful earnings upgrade cycle.
Long-term, however, we would revert to tech. The sector did so well last year and once society has opened more fully, we believe digital transformation will continue in both business and personal lives, and that it is still in its early stages. IT spending as a percentage of revenues, for example, is still just over 2%, which is very low for such a mission critical part of any corporate infrastructure.
9. What's the biggest economic risk right now?
We’re experiencing unusually higher levels of inflation, but the biggest risk is that this is misinterpreted by investors as a permanent stain on the outlook as opposed to a transitory phenomenon. There will be some headline grabbing price pressures year on year, but overall, it will take inflation expectations to become fully anchored before investors believe in the next multi-year expansion phase that we are just embarking on.
10. What can be done to increase diversity in the fund management industry?
It’s got to come down to a partnership between education and industry - instilling the belief in children that the City is open to them, and secondly for the City to be attainable to people from all types of backgrounds, not just those who look like me, or have been to a public school and university.
For several years, I was fortunate enough to participate in a fantastic competition called Shares4Schools, which was open to pupils across the country, in a bid to introduce them to investment markets. I spoke to many participants over the years about how I got into fund management, and what the day-to-day entailed. It was hugely worthwhile, and every year, I was impressed by the types of questions I was asked. The interest and talent are definitely there – shame on us if we cannot find a way to tap it.
11. What's an example of how you’ve engaged with a company you invested in where you were particularly proud of the outcome? (Or disappointed!)
Like many funds where ESG objectives are not the cornerstone of portfolio construction, we still continue to embrace governance and vote on resolutions. We engaged with a drinks company about their governance and decision-making, which we believed negatively impacted minority shareholders. We voted against the resolution and tried to engage face-to-face with the company. In the end, a lack of action and willing from them compelled us to sell the stock.
12. Best bit of advice you’ve ever been given?
When I started school, I was told “choose your friends carefully – don’t rush”. That served me just as well in the playground as it has in this job, whereby I can stand back, bide my time and not become too eager to invest.
13. What would you do if you weren’t a fund a manager?
A deep-sea fisherman, as I spent my early life growing up in Bermuda. The only issue was I never caught anything, which put paid to that little pipe dream. Oh, and I wanted to be a rock star, but don’t we all!
