In this series of short profiles, we ask leading fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they'd never buy.
This time our interviewee is Chris McVey, manager of the Morningstar 5-star rated Octopus UK Multi Cap Income Fund.
Which Sector Provides The Biggest Opportunities in 2022?
Rather than looking at sectors, we take a bottom-up approach to portfolio construction, searching for high quality, growing, dividend paying companies, with experienced management teams that we believe can grow earnings and dividends ahead of the market through the cycle. We continue to see a huge range of exciting, well valued opportunities that happen to be found across a range of sectors, from commercial and financial services, to engineering services and real estate.
What's The Biggest Economic Risk Today?
Inflation remains a concern. Whilst a significant proportion of our holdings will have pricing power that means they can largely protect margins; inflation, and resultant interest rate rises, will continue to cause equity market volatility.
Describe Your Investment Strategy
The fund looks across the entire UK equity market to find the most exciting, progressive, growing, dividend generating businesses. As a result, we will have a significantly larger bias toward faster growth small and mid-cap companies when compared to many more traditional UK equity income products, which are often dominated by the same, often anaemically growing FTSE100 names. We believe that through the cycle, taking a multi-cap approach will generate investors significantly better than market returns whilst delivering a predictable and progressive dividend yield.
Which Famous Investor Do You Admire?
Yvon Chouinard, the founder of Patagonia. One of the world’s most successful and environmentally conscious entrepreneurs. He developed a hugely successful business, whilst not sacrificing his principles. Patagonia, like Octopus, is a certified B Corp, encouraging "stakeholder capitalism", which is clearly a growing movement. We aren’t an ESG fund, but business principles and values are something we as a team take increasingly seriously when assessing potential investment.
Name Your Favourite "Forever Stock"
One thing I have learned from 20 years investment experience is that that there are very few "forever stocks". We take a three-to-five-year investment horizon and continue to find a considerable number of exciting opportunities. Our differentiated stance to portfolio construction, with a bias towards the small and mid-cap universe, offers us a plethora of fast growing, exciting businesses from which to build our portfolios.
What Would You Never Invest In?
We take a progressive approach to income generation. Our fund will therefore never invest in companies which do not look to the future and adjust their mindset accordingly. Things that really put us off are poor corporate governance, environmental concerns, and exposure to "sunset" or legacy industries. We are blessed with so many exciting growth opportunities we can afford to look widely, something many traditional equity income funds however do not have the luxury of.
Growth or Value?
We don’t like to pigeonhole ourselves by labelling ourselves value or growth. We look for fantastic companies that have the prospect of growing their earnings, and as a result, their dividends significantly. If we can find these companies at a good price, so much the better.
House or Pension?
Both, always diversify your assets.
Crypto: Brilliant or Bad?
We don’t invest in crypto and have no material opportunity to do so currently, however the technology is not going away. Should sensible crypto opportunities present themselves in future, of course we will consider them.
What Can be Done to Increase Diversity in Fund Management?
Diversity is a key challenge for the industry as a whole, and more needs to be done to ensure it is welcoming people from a much wider range of backgrounds. We’re committed to this at Octopus and I’m pleased to say we’ve made some significant strides. The ten-strong Quoted Companies Team is already 40% women, not quite 50:50, but we are getting there.
Have You Ever Engaged With a Company and Been Particularly Proud (or Disappointed) in the Outcome?
The Quoted Companies Team at Octopus holds significant positions across a number of our investee companies. We pride ourselves on being seen by these companies as partners as they look to grow and develop. Engagement is a key part of that process, through over 900 direct management meetings per annum, with both C-suite and non-executive board members, we are always keen to encourage companies to make decisions that are in the best interests of the business, and shareholders.
What's The Best Bit of Advice You’ve Ever Been Given?
Learn from your past mistakes, but don’t let them prejudice your views in the future.
What Would You Be if You Weren’t a Fund Manager?
I always fancied being a Formula 1 driver – it’s not too late, is it?
