‘We’re now at the top of the cy­cle’

The Daily Telegraph - Your Money - - INVESTING FUND OF THE WEEK -

In­vestors in the UK stock mar­ket over the past decade have been well re­warded for their faith, but as as­sets touch new highs find­ing un­der­val­ued shares be­comes ever harder. Julie Dean made a name for her­self do­ing just that dur­ing a tremen­dous 12-year stint man­ag­ing Schroders’ (pre­vi­ously Cazen­ove’s) UK Op­por­tu­ni­ties fund. It handed in­vestors a 314pc to­tal re­turn be­tween De­cem­ber 2002 and Septem­ber 2014, out­per­form­ing the sec­tor av­er­age by 134 per­cent­age points.

The prob­lem with huge re­turns for over a decade is in­vestors come to ex­pect them. Ms Dean left Schroders to join bou­tique firm San­di­ton As­set Man­age­ment, launch­ing a near-iden­ti­cal fund in June 2015, with for­mer col­leagues Tim Rus­sell and Chris Rice. She now runs just £116m in the TM San­di­ton UK Fund – com­pared with the £4bn she man­aged at Schroders.

Here she ex­plains how her be­lief in “busi­ness cy­cle” in­vest­ing ap­plies to her stock pick­ing and why the search for op­por­tu­ni­ties in the FTSE 350 is about to get a lot harder.

How would you de­scribe your in­vest­ment strat­egy?

It is all based on the busi­ness cy­cle – which is about un­der­stand­ing how value shifts through time and tilt­ing the port­fo­lio to re­flect that.

Com­pa­nies don’t op­er­ate in a vac­uum; they op­er­ate in the real world, which is sub­ject to the eco­nomic cy­cles of re­cov­ery, ex­pan­sion, slow­down and re­ces­sion. Dif­fer­ent types of com­pany will do well at dif­fer­ent stages of the cy­cle, depend­ing on the sen­si­tiv­ity of their busi­ness to changes in GDP growth.

It’s not just a growth or value fund – you shift as the sources of re­turn within the mar­ket shift.

Re­turns in the UK stock mar­ket are go­ing to be harder to find, San­di­ton’s Julie Dean tells Sam Brod­beck

How do you pick stocks?

Our uni­verse is the FTSE 350. We place stocks into seven “style group­ings” based on busi­ness char­ac­ter­is­tics, such as “growth de­fen­sive”. We use these to un­der­stand how firms are likely to per­form, in terms of profit and cash flows, as you go through the busi­ness cy­cle.

Which shares have you bought re­cently?

We bought Man Group, an in­vest­ment man­age­ment firm, which looks very cheap for what is a very solid busi­ness. It has scope to make ac­qui­si­tions and has a good price-to-earn­ings ra­tio.

On the other side, we’ve sold HSBC be­cause the val­u­a­tion ar­gu­ment changed. We made 30pc and could not see how we would make an­other 30pc or even 15pc. This is what good

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