Investors on the hunt for a fund manager who sticks to his guns would do well to turn to Standard Life Investments’ Harry Nimmo. The veteran small-cap manager has spent 31 years at the group and has been at the helm of the £1.2bn UK Smaller Companies fund since its launch in 1997. He is also lead manager on the Standard Life UK Smaller Companies trust.
But Nimmo has not spent his entire working life picking stocks. As a geography graduate from the University of Dundee and with a postgrad in surveying from Glasgow, Nimmo first got to work in the construction industry, embarking on a career in land surveying in the Middle East in the early 1980s. After three years in Saudi Arabia, however, he realised it would not work as a long-term plan.
He says: “It was good when I was young, getting involved in big projects, but I thought I would come back home and try something else. It is not a great lifestyle living in a caravan for three years, and the future Mrs Nimmo was not to be found there. So I came back to the UK and did an MBA with a focus on finance.”
The Saudi experience had provided him with enough cash to start dabbling in the stockmarket. “I was interested in the market, as it seemed to me like a growth industry – at least it was in those days.”
Nimmo recognises the asset management industry has matured a lot over the last 15 years but says the barriers to entry have made it a lot tougher to get into. If he was to start in fund management today, he says, his “big brain” would likely not be enough.
“My academic credentials might not have gotten me a job today because it is an incredibly competitive industry. Just look at what we are demanding from graduates. Fund management was not seen as a desirable place to be when I got into it 31 years ago but it very much is now.”
That said, for Nimmo, there are more important attributes for a fund manager to have. He says: “A lot of well academically qualified graduates gravitate towards the industry but you can have the brain the size of a planet and still be a poor fund manager.
“You have to see the wood for the trees and take account of what works. You have to have a process and be able to communicate that process. It is about good performance but you also have to convince others that it is safe to recommend your funds to clients, so it is not just about the individual.”
It is this method that has made Nimmo a star manager among his peers; a title he considers “nice” but not one that properly describes what he does.
“We have a process that runs regardless of who runs a fund. I consider myself to be a custodian of that process and I make sure all the managers that work for me use the same one.
“You have to concentrate your efforts in the smaller companies world, as there are so many stocks around you. But we have never had a company in our portfolio that has gone bust,” he says.
When Nimmo first joined SLI, all of the firm’s funds were internal and for institutional investors. In 1997, it launched its first Oeic for external investors in the form of Nimmo’s UK Smaller Companies fund. The fund is the largest UK smaller companies vehicle in this country and has been that way since launch, even though it has been soft closed to new business since 2011.
The fund group made the move to soft close the strategy after soaring inflows pushed its assets up to £1.3bn. It reopened to Hargreaves Lansdown in 2014 but remains closed to other advisers and distributors. It has since seen outflows of £600m; however, Nimmo says there are no plans to reopen it.
“The fund used to be available on every platform but it is now only on a couple as it does not really suit the financial adviser or wealth manager anymore. Capacity is an issue and we think we did the right thing. There is a limit on how much money you can run successfully in a smaller companies fund and we are fairly close to it.”
The manager describes the fund’s performance over the past two years as “reasonable although not spectacular”. His focus now is more on growing funds that invest outside the UK, after seeing strong inflows into the group’s international small cap strategies, with most going to the £600m European Smaller Companies and £370m Global Smaller Companies funds.
Meanwhile, asked how he intends to play his UK fund in light of the Brexit vote, Nimmo is typically resolute on his strategy. He says: “Post-Brexit there are tremendous opportunities but we stick to our process and for the long term. We think high quality businesses will continue to do well, especially if they are oriented towards growth.
“We have been running UK smaller companies strategies for four cycles. The years 2007 and 2008 were very good for us but with bear market conditions, the bursting of the tech bubble, the banking crisis and even the euro crisis, our process has not changed. That is when fund managers are tested.”
What is the best bit of advice you’ve received in your career?
Have a methodology to get superior returns.
What keeps you awake at night?
A banking crisis in the financial system and ultra low interest rates.
What has had the most significant impact on asset management in the last few years?
The skill-set getting more demanding than ever among fund managers.
Any advice for new fund managers?
Stick with great companies and hold them for ages.
2003-present Manager, Standard Life UK Smaller Companies trust
1997-present Manager, SLI UK Smaller Companies fund
1993-present Head of smaller companies, SLI
1990-1993 Senior investment analyst (UK large caps), SLI
1985-1990 Investment analyst, SLI