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Tom Walker

Last Friday, America may have celebrated Independence Day but the performance of the US economy in the last two years, combined with the weakness of the dollar, has left many UK investors with little to smile about.

Several funds have continued to do well, one of which is the Martin Currie North America fund managed by Tom Walker.

Walker has been running the fund since 1998 and, since January 2007, jointly with David Forsyth. Over the last five years it has returned 42 per cent against a sector average of 12.8 per cent, and over three years the figure is 21.6 per cent compared with a loss of 1 per cent for the average fund.

Walker did not start his working life in fund management. After graduating with a law degree from Cambridge, he obtained a diploma in accountancy from Heriot-Watt University in Edinburgh and then qualified as a chartered accountant. However, the business, “particularly the auditing function”, did not hold his attention for long.

Among his audit clients were several fund management firms and having seen the exotic travel expenses they were incurring, he decided to cross the fence. “It seemed more exciting,” he explains.

Walker joined Edinburgh Fund Managers in 1987, just in time for the stockmarket crash of that year which he describes as a baptism of fire. By 1991 he was heading the firm’s Asia team.

In 1993, he joined Barings, a move he says was driven by a desire to be in the same region as the market he was investing in and to experience a different way of life.

“I was quite keen to go and experience live markets, to actually live in Asia.”

Walker spent three years in Hong Kong and his experience was enlivened by the Nick Leeson-inspired demise of the venerable British bank during his time there.

An approach from Edinburgh-based Martin Currie tempted him back to UK shores. He says he was not particularly looking to return but neither was he interested in moving to London and Martin Currie seemed to fit the bill.

Walker was initially recruited as head of Asian equities but two years later took over the underperforming North America fund.

“By that stage, I had been doing Asia for 11 years and it was a combination of Martin Currie’s needs and me looking for a new challenge. There was a bit of a problem with performance and there was a need to do something about it.”

Since taking over the job, he says both he and Martin Currie have changed investment style, becoming much less top-down.

“Ten years ago, we had a house view, an asset allocation committee and a bit more prescription in terms of what managers did in their funds. About eight years ago, we started an evolution of the investment process, handing more responsibility and accountability to individual fund managers. We abolished our asset allocation committee and house view, which is not to say we do not think top-down investment, themes and macro trends are relevant but simply that finding good companies is more important.”

Walker was not as quick as some analysts and commentators to pronounce the US as being in a recession but he has now conceded that it is. Even in recession, he is confident of finding opportunities.

US consumer spending may be down and financials suffering badly but the cheap dollar makes companies that do a large amount of business outside the US attractive. Also, the breadth of the US equity market has opportunities, regardless of the conditions.

These issues, and the high price of oil, are reflected in the fund’s top 10 holdings in which energy stocks, IT and industrial manufacturers are all well represented. Only one retailer, pharmaceutical giant CVS, makes the grade.

Walker says the fund’s concentrated investment approach, which limits investment to a maximum of 40 stocks at any one time, is central to its performance. Buying any new company results in one being sold, meaning that only the best stocks make it into the portfolio.

“Fund managers generally, and myself definitely, are better at buying than selling, so one of my key sell disciplines is to have a finite number of holdings in a portfolio, forcing you to sell a stock to buy a stock.”

This approach also allows the fund to avoid whole sectors and Walker points out that he has not held any housebuilders for two years. He also has a very low exposure to financials, which he says will remain unattractive for several years, rather than several months.

In addition to the North America fund, Martin Currie recently launched an even more concentrated version of the offering, the North America alpha fund. This is also run jointly by Walker and Forsyth and has a maximum of only 25 funds. It has an unconstrained approach which allows the managers to increase their exposure to funds they feel strongly about but also means it can be more volatile than the core North America fund. “We do not have limits other than Ucits III,” explains Walker.

Launched in November, the fund was up by 6.5 per cent by the end of June and Walker says he is pleased with performance so far. “If we get things right in the core fund, the alpha fund should be even better.”

Looking to the future, Walker says he is not expecting great things this year but he believes next year could be a turning point. With a belief that the dollar is undervalued by as much as 25 per cent, he says a general recovery could start in 2009 although he says this will be slow and steady rather than the sharp turn-round some are predicting.

There has been a lot of bad news coming out of the US but there are some reasons to be optimistic and investors in Walker’s funds at least have something to celebrate.

Born: Paisley

Lives: Gullane, East Lothian

Education: Glenalmond College and Magdalene College, Cambridge

Career: 1996-present – investment manager, Martin Currie Investment Management; 1993-96 – Asian investment manager, Baring Asset Management; 1987-93 – Asian investment manager, Edinburgh Fund Managers: 1983-87 – chartered accountant, KPMG

Likes: Winning

Dislikes: Losing

Drives: Audi Cabriolet – occasionally with the roof down

Favourite book: Currently Imperium by Robert Harris

Favourite film: Where Eagles Dare

Favourite album: Madam Butterfly

Life ambition: A game of golf at Augusta

If I wasn’t doing this I would be… “A rather better golfer than I am now.”


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Auto-enrolment — don’t leave it too late…

With auto-enrolment (AE) well under way for the UK’s largest businesses, over the next three years an additional 800,000 smaller employers (with less than 60 employees) will start their journey to comply with the legislation. AE mandates all eligible employees and their respective employers to make regular pension contributions into a qualifying pension scheme. To learn more about the legislation read our brief Jelf AEase — simple steps to AE compliance guide.


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