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Tony Stenning

BlackRock’s UK head of retail is a stickler for detail and for finding the best solution for his clients, virtues that helped him establish the absolute
alpha fund and which have allowed this innovative vehicle to deliver consistently good returns. Interview by Lee Jones.

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It is BlackRock head of retail Tony Stenning’s self-confessed eye for detail that has not only helped him move ahead in the investment industry but also helped him create one of the most innovative funds of the last decade.

“I love really getting into the detail of things,” says Stenning. “I was looking at the Ucits III rules when they came out and went to our regulation guy and told him that I think they said we could short. He looked them over and agreed and I told him I wanted to create a simple absolute return fund.”

Stenning took advantage of the new European investing rules to begin putting together BlackRock absolute alpha, which has seen an 18.3 per cent return over the last three years, according to Morningstar.

“Hedge funds were created to hedge market risk, to be beta neutral and to have no leverage. So we wanted to do the same wth the fund, keeping it really simple. If we could make 8 to 10 per cent per annum, replicating a long-term equity return without the volatility, we felt that would be a good fund to do.”

Stenning’s brainwave came after years spent running money as a stockbroker for private clients. After failing to get into the Royal Navy as a principal warfare officer, he used his economics degree to join a small City boutique: “I was the firm’s economist and an assistant fund manager. It was the investment arm of an accountancy firm and we only ran £250m but you really learn a lot at a small firm.”

Although then in his early 20s, Stenning helped launch the first global common investment fund for charities: “We called it alpha deliberately so that it was the first one in the listings,” he says.

After several years at the boutique managing unit trusts, he moved to what is now Rensburg Shepherd to manage its offshore funds while also acting as a private client stockbroker: “I didn’t know if I wanted to run money or manage funds but this let me hedge my bets.

“Working as a private client stockbroker you learn that your clients want to achieve a year-on-year incremental increase in their wealth. They may profess to be a relative return investor and may beat you up if you have only increased their wealth by 20 per cent when the market moves up 25 per cent, but if you lose some of their wealth they are not happy with that.”

Stenning eventually took the decision to concentrate on fund management rather than stockpicking: “I asked myself what turns me on, and it was working out the solution for the client. When managing funds, it is about finding the solution and providing that to the client. That is what gets me out of bed in the morning.”

So he began managing funds at Mercury Merrill Lynch, which became BlackRock in 2006. After spending time consolidating the firm’s portfolio of funds, Stenning became managing director of unit trusts and following a management reshuffle last year he took up the role of head of UK retail.

“Running the business does not mean I do not get into the solution side. I still love meeting clients, working out what is causing them angst and coming up with a solution.”

This was illustrated in his work to create the absolute alpha fund. Stenning says it took nearly three years to solve all the problems that may have come about in running a daily trading hedge fund with thousands of investors: “We were so cognisant that if we didn’t cross all the Ts and dot all the Is we would not just clear the pitch for ourselves but we would do it for the whole industry.”

A big part of that for Stenning was talking to IFAs. He said during the creation of the fund they spent a lot of time educating advisers in how the fund worked and what was under the bonnet.

“My concern is that everyone in the industry jumps on the next hot thing without thinking about the client, about what the client wants, whether or not the fund has been stress-tested and not knowing whether the client will still be safe if it all hits the fan.”

Stenning admits that absolute returns are more complicated funds but hopes lessons learnt from the financial crisis mean both advisers and clients have a better understanding of risk and return when looking at funds in the future.

He says: “I would like to think advisers and clients now better understand that things can go down as well as up and have a better recognition of how downturns affect a portfolio.”

But he does worry that lessons have not been learned across the whole industry: “We have just been on most amazing bull run in history, so is there any surprise the balanced sector has 80 per cent equities or that the cautious sector is made up of 60 per cent equities? How is that cautious?

“For advisers, it is about articulating to clients and making them understand that the equity sector as a long-term investment vehicle is a good thing, but there is volatility that comes with it.”

Stenning also says part of that responsibility lies with the provider in creating safe new products that can solve problems. “For us, there are going to be more hybrid products that might seem niche now but over time will fit with the client’s needs. I do see crossover in types of product, but it is ultimately about helping the adviser help the client get the right result in terms of the risk-rated portfolio and being aware of how the return characteristics can change.”

Born: West Sussex, 1970
Lives: Suffolk
Education: Nottingham University – BA hons in economics, fellow of the Chartered Institute for Securities and Investments
Career: 2000-present: head of UK retail at BlackRock; 1996-2000: Carr Sheppards Crosthwaite; 1993-1996: Ely Place
Likes: Boxing, rugby, Portsmouth FC, cricket, skiing, sailing
Dislikes: Southampton FC, incompetent train companies
Drives: 1994 Jeep Cherokee,
TVR Tuscan and a Volvo XC90
Book: Stalingrad by Antony Beevor
Film: Anything Monty Python or Clint Eastwood (both as actor or director)
Album: Anything from Snow Patrol, Elbow, Jam, The Who, The Kinks, David Bowie
Career ambition: It always was to be in the Navy
Life ambition: Be happy, have fun
If I wasn’t doing this I would be… A Naval officer, a cook or a history professor

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