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Profile: RLAM’s Martin Cholwill on why cashflow is king and dodging the actuary life

Royal London’s Martin Cholwill had originally planned to be an actuary, but decided it was too boring. Instead, the UK Equity Income  fund manager has brought an actuarial fastidiousness to fund management.

Within two years of getting a junior job as an actuary, he switched to the UK equities desk – a sector he has stuck with for almost 31 years.

A relaxed man who exudes an air of calm, Cholwill focuses on cashflow and a company’s ability to cover its dividends when picking stocks.

While his manner may be understated, his record is anything but. On joining Royal London Asset Management in February 2005, Cholwill faced a challenge in turning around the poorly-performing fourth quartile UK equity income fund and growing its assets.

The £1.48bn Royal London UK Equity Income fund is now first quartile over one, three and five years to 3 September, according to FE Analytics.

Cholwill says: “It was just over £200m and it’s now approaching £1.4bn with some good growth from external funds under management – it’s mostly external now.”

Over the past five years, the fund has beaten the equity income sector by 38 percentage points, posting a 118 per cent return.

Since taking over the fund, Cholwill has returned 145 per cent compared with the peer group average of 103 per cent.

Inflows to the fund have been helped by Neil Woodford’s departure from the sector-dominating Invesco Perpetual Income and High Income funds.

Cholwill’s fund has captured more money over the year to 30 August than any other IMA UK Equity Income rival, FE Analytics data shows. The £764.57m of inflows have outstripped those of its nearest competitor – the £6.76bn Artemis Income fund – by almost £222m.

Cholwill first cut his teeth on Equity & Law’s UK equities desk in 1983 and soon realised researching companies was much more interesting  than staring at actuarial and mortality tables.

He says it was an exciting time to be working in the City, with the late prime minister Margaret Thatcher’s Big Bang deregulation and the 1988 Axa takeover of Equity & Law.

Cholwill ran money for pension funds and other mandates until 1996, when he took control of the Axa UK Equity Income fund. It had amassed about £3.5bn by the time he left the company in 2004.

Cholwill was one of the first hires made by Robert Talbut, who was then the newly-appointed chief investment officer at RLAM.

Investment process is everything for a fund manager, and the ability to move to a large fund house while keeping his process intact was a big attraction, Cholwill says.

He believes cashflow is the basis of a good company, and consequently it is the cornerstone of his style.

“Particularly in the world of anaemic growth, you need to invest in the companies that don’t just give you a decent yield, but also have the ability to grow them in the medium to long term. The question is, do these firms generate enough cash to control their destiny? A lot of processes that worked in the old world have struggled to work well in the past few years or so.” 

Building a durable, leading UK equity income franchise is his ambition and he has no inclination to break out into something different, despite more than three decades in the sector. 

“For fund managers, the world is always changing. When I started working 30 years ago, nobody had computers – it was all pen and paper.

“The universe you can invest in completely changes over time. The market is completely different to what it was.”

He gives the example of textiles manufacturer Polly Peck as a company that saw its fortunes change dramatically. He says it also demonstrates the need to look past strong profits and ensure the performance converts to cash.

Polly Peck soared from small manufacturer to high-flying FTSE 100 raider before crashing spectacularly in 1990.

Cholwill had steered clear of the company but says its failure reinforced his belief in robust cashflows. “I thought: ‘How could a company that was so profitable go bust?’”

Polly Peck made a lot of money in Northern Cyprus, where high inflation was eating into profits, but used historical cost accounting to hide the effect of foreign exchange on profits.

“The cash was illusory because it was sitting in a high inflation environment,” Cholwill says.

In terms of management style, Cholwill is against the philosophy of having “bums on seats” in the office just for the sake of it.

He says if work needs doing, he and the team can put in solid hours, but he is not afraid to head for the door if there is nothing left to do.

That said, Cholwill still ensures he is at his desk at 7.30 every morning for the opening of the stockmarket.

Interest in current events is an important part of running money, he says, as both politics and economics hold sway over markets.

A serial commentator on political ructions in the markets, he laments the substitution of depth for polish in UK political argument.

“Back in the day, debates were at a much higher level, and politicians now are too media-trained. They can only repeat the message and cannot really think outside the box.

“I have always had an interest in current affairs, and also in what makes people tick.”

Cholwill says he loves working on UK stocks because their global reach means he never feels “hemmed in” by the sector.

“It’s a real pleasure and real privilege of the job to meet lots of executives from interesting companies, and you really get a bird’s-eye view of what’s going on in the world. Fund managers get much better with experience, which is probably why most of the high-performing fund managers are older and more experienced.”

Cholwill says doing a job he finds so stimulating is what has kept him going. “As a fund manager, you always want to play to your strengths, and my experience is in UK equities.”

Five Questions

What’s the best bit of advice you’ve received in your career?

Do something you enjoy as you will spend many hours each day doing it.

What keeps you awake at night?

Very little.  I am not one of life’s worriers.

What has had the most significant impact on financial advice in the past year?

The prospect of no longer having to buy an annuity on retirement; change means opportunity.  

If I was put in charge of the FCA for a day I would…

Reduce the burden of documenting adherence to the rules.

Any advice for new advisers?

Learn from those around you and find your niche.


2005-present: Senior fund manager, Royal London Asset Management

1988-2004: Fund manager, Axa Investment Managers

1983-1988: Junior actuary and fund manager, Equity & Law

1978-81: Studied mathematics minoring in psychology, Durham University


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