MAM Funds managing director Gervais Williams says the lessons he learned working on a farm with his father have stayed with him.
“I know what hard work is like and I have dealt with the ups and downs. The trouble with farming is you could get a poor crop or bad weather. That is real-world experience that is useful to keep you grounded in the sophisticated world of fund management. It is too easy to get tied into market movements and news and get disorientated.”
Williams’ career in fund management started after a spell as an engineer. After studying marine structural engineering at Liverpool University, he joined consulting engineers Sir Alexander Gibb and Partners where he spent five years before joining small-cap specialist Throgmorton as a trainee fund manager. “I got into fund management in 1985 because I have always been interested in business. Fund management is about taking a lead, taking a view versus the markets and going beyond the facts to make a judgement even with incomplete information.”
He went on to be a fund manager for Principal Investment Management, Thornton Investment Management and County Natwest, which became Gartmore. He spent 17 years at County Natwest and Gartmore but left the company before it put itself up for sale in 2010.
Williams says the fact the MAM Funds business is less focused on benchmarks stands it in good stead for the future.
“The firm has got a history of not pandering to consensus. We have entered a period where stockmarket indices are becoming less important and bottom-up stock selection is becoming more important. A business that is benchmark- agnostic is likely to be successful in the coming years.”
In terms of investment trends, Williams says we are beginning to see the credit bubble in the UK deflate and this means the reversal of the trends of the last 25 years. “Investors will move away from indices as a primary determinant of their investment selection because if the FTSE markets go up and down as they have for the last 12 years and produced no return, it is not good to be tied closely to the index.”
Williams says this means investors are going to realise there is an advantage in moving away from the crowd and invest in areas that are driven by stock-specific analysis. He adds this is an advantage for smaller companies and minority assets.
“Small companies, those under £200m, have been out of fashion for 25 years. However, they tend to have low valuations and, as they have been deleveraging, their balance sheets tend to be strong. The smaller quoted companies are the ones not distributing an income at the moment and they can afford to increase their income at a faster rate than other types of company. This will start to show in better investment performance and upward share price moves.”
Williams is running a £44m diverse income trust and £7.8m Acuim UK multi-cap income fund with fund manager Martin Turner and says he would love to run a UK small-cap fund for the company.
“In multi-cap income, we would like to introduce a multi-cap product that is narrower focused to offer a higher rate of return albeit with more volatility. We have 100 holdings in our other income funds, this would have 20 to 25 holdings.”
He is wary of the new Investment Management Association sector definitions and says they have the potential to constrain investment managers’ decision- making. He would prefer a wider equity parameter in the mixed investment 20 to 60 per cent shares sector.
“With our funds, their risk varies at different times. In 2009, when we were trying to participate in market recovery, risk ratings were quite high. I worry that the current arrangements will constrain the ability of a fund manager to move the risk rating from one level to another. That might work against clients’ interests. We have got some thinking to do on the new definitions.”
Another long-term trend that Williams sees developing is the re-emergence of income as an essential component of investment returns to investors, an element that he says has been overlooked in the last 25 years.
“Gathering income is one of the most reliable ways of delivering return. Market volatility is not important, as when the market goes down, you can reinvest your income and the more shares you buy. In contrast with funds that do not pay an income, speculative capital gain is subject to capital loss.”
Williams’ theories are expressed in his book, Slow Finance, which was published last October. It advocates investing in the UK market and warns against getting carried away with overseas investing.
“There are a lot of unknowns about overseas investing. With domestic investing, a direct connection where you can go and see companies is to become more
Williams says another danger of investing in emerging markets is you end up overpaying for the potential for growth in terms of prices for valuations in the growth markets, like the emerging markets. “If you can invest in an asset class, albeit in a mature economy, and it is going to grow its income from a good level, you should be able to make good returns with low risk.”
He says the UK economy is in desperate need of growth at the moment and domestic investment can help this. “The purpose of investing is allocating to those businesses which can deliver more economic growth and more wealth and more jobs and if we are just shovelling money into China, we are losing potency in terms of allocation of capital.”
He is currently promoting ideas with the Government as part of his position in the Quoted Companies Alliance where he is a board member.
Williams is calling for the removal of stamp duty from all quoted stocks outside the FTSE 350 and dividend reinvestment to be free of income tax.
“It would be ideal if we could get funds dedicated to that with these two exemptions in place. This would transform the opportunity for new funds to be launched in this area.”
Born: 1958, in Abergavenny, Monmouthshire
Lives: North London, with partner and three children
Education: Degree in marine and structural engineering at the University of Liverpool
Career: 2011: managing director, MAM Funds; 1993-2010: head of UK smaller companies, County Natwest/ Gartmore; 1990-93: joint fund manager in UK smaller companies team, Thornton Investment Management; 1990: lead fund manager, Principal Investment Management; 1985-90: trainee fund manager to lead fund manager, Throgmorton; 1980-85: chartered engineer, Sir Alexander Gibb & Partners
Likes: Direct contact with individuals rather than electronic contact, a peach of an investment and kindness
Dislikes: Truffle oil, excessive debt and arrogance
Drives: Nothing, not needed as I live in central London
Book: Slow Finance by Gervais Williams!
Film: The Draughtsman’s Contract, directed by Peter Greenaway
Album: The Koln Concert by Keith Jarrett
Career ambition: To deliver success for my clients and be recognised as having done so
Life ambition: To see my family grow up and to grow an orchard
If I wasn’t doing this, I would be… Running a smaller business or maybe a horticultural farm like my father used to