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 week our interviewee is Helen Steers, lead fund manager of the Morningstar 5-star rated Pantheon International PLC.
Which Sector Shows the Biggest Promise in 2022?
We seek to invest in resilient and defensive privately-owned businesses in growing niche subsectors, which are being driven by long-term secular trends such as digitalisation and automation, changing demographics, sustainability and energy efficiency. We believe that these are underlying themes that are here to stay whatever the macroeconomic environment.
What's the Biggest Economic Risk Today?
Lower global economic growth, rising interest rates, high inflation and supply chain issues present an unenviable mix of challenges for businesses. In the current environment, it is more important than ever to be highly selective when assessing deals for investment. We will continue to back resilient, growing companies, alongside high-quality private equity managers who are sector specialists and equipped with sufficiently resourced and experienced operational teams to support their portfolio companies through uncertainty.
Describe Your Investment Strategy
PIP invests directly into private companies across the globe, and also into funds, partnering with many of the very best private equity managers in the world. Private markets are difficult to access for many investors for a number of reasons, and private equity investments are hard to manage for all but the largest institutional investors. PIP’s shares are traded on the LSE, just like any other publicly listed company, providing investors with straightforward, globally diversified, liquid exposure to private equity.
Which Famous Investor Do You Admire?
David Swenson, chief investment officer at Yale University, who passed away last year, was a pioneering and inspiring investment manager, who emphasised diversification beyond publicly traded stocks and bonds, incorporating illiquid and alternative assets into the endowment’s portfolio. Under his guidance, the Yale endowment fund delivered long term exceptional outperformance over a more-than-30-year period.
Name Your Favourite "Forever Stock"
In Information Technology, we like high-quality enterprise software and business infrastructure companies providing mission-critical services and benefiting from high recurring revenues, pricing power and strong profit margins.
Within Healthcare, we target businesses taking advantage of opportunities arising from ageing developed countries, including the increased need for certain medical devices and services and growing demand for high quality healthcare in developing countries.
Our consumer staples investments are in resilient businesses, for example those providing education services, with limited exposure to companies highly sensitive to downturns.
What Would You Never Invest In?
Although PIP currently has c.4% exposure to energy assets, these are legacy positions, and we are no longer investing in fossil fuel-related energy businesses. This is for two reasons: firstly, we don’t like the dependence on commodity prices, which are volatile, and out of our control. And, secondly, we take our commitment to ESG extremely seriously and integrate ESG factors throughout the investment process for PIP. Therefore, investments of this type no longer represent a good fit for PIP’s portfolio, and our energy exposure will come down over time as these assets are realised.
Growth or Value?
PIP’s investment strategy is to maximise capital growth over the long term, and it has been extremely successful; over the past 35 years, PIP’s Net Asset Value (NAV) has grown by an average of 12.4% per year, significantly outperforming the public market benchmarks. This performance is stated net of all fees.
House or Pension?
Both are important!
Crypto: Brilliant or Bad?
We don’t invest in it. It’s simply too volatile and isn't a home for private equity investment.
How Can We Increase Diversity in Fund Management?
D&I is in our DNA, from recruitment, through to training, development, retention and promotion. For example, in our recruitment process, candidates are sourced from a wide demographic using various platforms and partnerships. We have an active mentoring programme and policies in place to support all employees, and a robust promotion process.
I’m proud to say that 43% of Pantheon’s investment professionals are women, and 43% of our investment team heads are women, so as a firm these initiatives have made a difference but there is always more we can be doing.
In the wider private equity industry, there is still some way to go to achieve the level of diversity and inclusion of women and ethnicities we need. But we are encouraged to see that there is now more understanding of the importance of diversity, and its impact on performance, and investors in private equity funds are demanding more on this front.
Have You Ever Engaged With a Company and Been Particularly Proud (or Disappointed) in the Outcome?
We engage principally with private equity managers rather than directly with the companies in PIP’s portfolio. Our position on over 580 advisory boards around the world gives us an opportunity to do just that and to influence our managers to ensure that they are managing their underlying companies responsibly.
What's The Best Bit of Advice You’ve Ever Been Given?
Many years ago, when I was just leaving university and entering the world of work, my father dug out that famous speech from Hamlet, and told me "whatever you do, to thine own self be true". What he meant was that I should stay loyal to my core values, beliefs and principles, and not over-worry about others’ views or try to be something I am not. It’s simple advice really about self-honesty and recognising your own strengths and weaknesses.
What Would You be if You Weren’t a Fund Manager?
An aeronautical engineer, designing next generation green aeroplanes and spacecraft.
