Fund of the week ‘A good Brexit deal would be really bad for my

Richard Hallett tells Jonathan Jones why his stocks are protected from the pandemic but will fall behind if the market starts to rally

This year has been challenging for all fund managers who invest in British companies. Richard Hallett and his £256m Marlborough Multi-Cap Growth fund have steered investors through the worst of the crisis, however.

So far in 2020 the fund has gained 0.6pc while the FTSE All-Share index, a benchmark for the market, has lost 17pc.

He explains how the top-performing fund has survived the worst of the falls and why the biggest risk to his portfolio is that Britain and the EU manage to agree a swift and thorough trade deal before the transition agreement ends in December.

WHAT MAKES YOU DIFFERENT TO OTHER BRITISH STOCK FUNDS? The main differentiator is that this is a genuinely multi-cap fund. It is free to roam right the way through the market, from FTSE 100 stocks all the way to start-ups and minnows.

HOW DO YOU SELECT STOCKS? The main thing we look for is a company that has a competitive edge. This makes it more likely that its earnings will be sustainable and grow. Things such as innovative products or a great brand.

Second, the companies need to be operating in sectors that are benefiting from long-term trends. This means areas such as the growth of digital payments and ecommerce. You want to own a stock that gives a double whammy of being in a great market and being a leader in it.

Third is looking at their competitors to make sure these stocks can continue to be leaders for a long time.

Valuation is also important – and we do keep an eye on it. However, while other investors might buy a stock with a price target and then sell when it reaches their goal, we do not. If things move up very fast and look out of kilter, we will take profits rather than sell out completely. The reality is that there are not many stocks that fit

Richard Hallett

Rentokil – We look for companies that are leaders in their field, and Rentokil is dominant in pest control. It has several competitive advantages, such as great branding and management expertise that gives it an edge over rivals. Health standards are improving and as global warming rises we are getting more pest infections. Recently, Covid-19 has also meant businesses are spending a lot more on hygiene.

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telegraph.co.uk/ markets-hub our criteria, so it is much better to keep owning good stocks rather than sell and buy something that is inferior.

WHO IS THE FUND FOR? It is for people who want to invest in the British market and are looking to grow their investment over the long term. You have to leave it for at least five years.

As American technology stocks have shown by their recent sell-off, buying companies for the short term can be quite a big mistake.

HAVE BREXIT OR CORONAVIRUS AFFECTED YOUR STOCKS? We pay a lot of attention to the political and economic environments but we do not get bogged down in them or let them influence what we own.

I would like to think we have mitigated the risks from both. Performance so far this year shows that Covid hasn’t really affected the companies we own.

Brexit brings uncertainty for the British economy, but we don’t buy stocks that are affected by the economy of one particular country. So while it is an issue – and may well be for quite a long time – our companies are completely different.

The problem would be if we got a great deal with the EU really quickly and the London market picked up.

All the cyclical stocks that we actively avoid, such as banks and high street retailers, would do really well and our fund would look worse compared with rival fund managers.

WHAT HAVE BEEN YOUR BEST AND WORST INVESTMENTS? One of the better ones has been Dechra, a veterinary pharmaceuticals company. Marlborough has invested in it for a couple of decades and we have owned it for 10 years or so in this fund.

It has grown very fast and blossomed from a domestic company to what is now a reasonable global business. It was at £6.20 when we last bought, in April 2013, and it is now at £33.

The worst is one I still think about: a small company called Yu Group, which provides energy to businesses in Britain. It looked quite resilient, with secure contracts creating recurring revenue, but in the fourth quarter of 2018 it disclosed that its accounting controls were not up to standard. The share price fell from more than £9 to £1, so we lost 88pc overnight.

You have to move on, learn what to look for, but not let it affect your ability to take risk.

HOW ARE YOU PAID AND DO YOU OWN THE FUND? I am paid a salary and a bonus, which is linked to performance and assets under management. A lot of my pension and other savings are invested in the fund.

What £1,000 invested in 1995 would be worth now

WHAT WOULD YOU HAVE BEEN IF NOT A FUND MANAGER? I think about that sometimes when the market is falling. I’ve always thought I would be a doctor.