In this 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.
This time our interviewee is Alexandra Jackson, manager of the Morningstar Silver-rated Rathbone UK Opportunities Fund.
1. Which sector provides the biggest investment opportunity as we approach the end of 2021, and why?
The Industrials sector continues to be our biggest overweight sector. It’s incredibly varied: here we own businesses from automotive suppliers, to electrical component distributors, to recruiters, to law firms, all labelled ‘Industrials.’ At any point in the cycle, there are different UK industrials names that you’d want to own. For us, the sector offers cyclical beta without the singular reliance on oil prices or iron ore or interest rates, like in other cyclical areas. Currently, booming infrastructure spend in the UK and US is providing a nice tailwind to some of our positions, while the home improvement trend shows no signs of going away. The sector is also a great way to play global trends, that some investors assume cannot be accessed in the UK. Semiconductors, for example. The UK market may not be home to global chip manufacturers, but we do have niche engineers who make the component parts for those factories.
2. What's the biggest economic risk right now?
A perceived policy mistake from the Fed – tapering or hiking rates too soon tends to spook markets, that have become rather dependent on central bank liquidity.
3. Describe your investment strategy
To scour the UK market, with no restrictions or caveats, to find the very best quality growth companies we can. We see around 400 companies a year and aim to choose the best 50 or so of those. Conviction plus nimbleness.
4. Which famous investor or business professional do you look up to, and why?
A smorgasbord of investors who I read about and have worked with. Then there is Serena Williams – not primarily known as an investor of course. But on the quiet she has used her wealth to invest in a range of early stage businesses, focused on diverse leadership and creating opportunity. This is where change happens.
5. Name your favourite forever stock(s)
This question usually ends in tears so I’m going to shamelessly swerve it and say a balanced portfolio of UK growth stocks!!!
6. What would you never invest in?
I would never say never. But I’ve made very few successful investments into oil exploration stocks. Although I do love pouring over the geologists’ maps.
7. Growth or value?
This has dominated our client meetings for a year now. But we don’t see it as an either/or. We always want to buy the highest quality growth companies we can. And we buy those because that’s where we see value. High quality growing companies can continue to grow longer and faster than most investors and analysts are able to forecast.
8. House or pension?
From a young age, my dad drilled me in his ‘a third, a third, a third’ rule. Split your earnings into three, he said; the first third you save (pension first, then ISAs). The second third you spend on rent/mortgage and bills. The final third you get to spend. In my 20s this was very hard to live by as renting a place in London was a lot more than a third of my salary. But gradually the operating leverage starts to drop through, and by then hopefully the discipline has stuck. In my 30s it got harder again with outrageous childcare costs. Now my children are at school I can double down on saving again.
9. What are your thoughts on crypto?
I have personally dabbled in a small way, with money I didn’t need for a few years. Mixed success, probably wouldn’t buy it again, probably won’t exit totally either.
10. What can be done to increase diversity in the fund management industry?
We need to widen our net without lowering the bar. The industry has typically recruited from a small pool of people, and it becomes a bit self-fulfilling. Better highlighting the many careers available within fund management to a broader group would be a good step. Work experience, paid internships, blind recruiting can all help with the pipeline.
11. Please give an example of how you’ve engaged with a company you invested in where you were particularly proud of the outcome? (Or disappointed!)
One of the joys of investing in smaller companies is that engagement doesn’t just happen at AGM season. We see our companies two or three times a year and have sensible two way conversations. So voting our shares is integral to portfolio management but not the only way we seek to encourage positive change. Our recent discussion with the CEO of a warehousing business about installing solar panels appears to be bearing fruit.
12. Best bit of advice you’ve ever been given?
That this job is as much about people, personalities and trust as it is about crunching the numbers. Emotional intelligence can be the magic ingredient for generating alpha, but doesn’t always feature highly in the financial sector.
13. What would you do if you weren’t a fund a manager?
I’d always fancied myself as an excellent teacher – I rate my organisation and explanatory skills highly. Having our children at home during lockdown swiftly showed how wrong I was. My elder daughter summarily fired me as maths teacher during our first session on equivalent fractions.
