Henry’s the Man as he shuns the ‘white noise’ of EU vote
A GYRATING stock market and pound in recent days may have caused the C City’s pulse to rat ratchet up a notch or two. But it ha has done little to unsettle lH Henry Di Dixon of asset manager Man GLG.
Throughout the run-up to last week’s referendum, Dixon has remained phlegmatic – and largely indifferent to the outcome. Accepting that market turmoil was inevitable short term, he has been concentrating on the long term – ensuring the 70-strong portfolio of the Man GLG UK Income fund is fit for its purpose.
He is confident the fund is set up to deliver the same kind of outperformance that he has managed to achieve since he took over the helm in November 2013.
Since then, the fund has returned 21 per cent – better than the average from rival UK equity funds (12 per cent) and superior to the 6 per cent return from the FTSE All-Share Index.
He says: ‘I’ve tried to shut out the white noise and stay loyal to the investment process that has underpinned the fund since I joined from investment manager New Star.’
There are various prongs to Dixon’s investment approach. Key is holding shares that have fallen out of favour, but which he believes will come good again. He refers to this as the ‘contrarian’ part of the fund and explains why 45 per cent is in financial groups, such as HSBC, insurer Direct Line and Standard Life. ‘Most of these businesses are adept at generating cash,’ he says.
He also likes shares that are cheap relative to the rest of the market, but where there is evidence of a ‘momentum’ in earnings growth. Car insurer Admiral Group fits this bill.
This is one of the fund’s top 10 holdings and Dixon says the shares should perform strongly on the back of the company’s diversification into home insurance. As befits the fund’s income bent, Dixon is always on the hunt for firms that have the capacity to increase their dividends. ‘I like strong balance sheets, companies that have little or no debt and have sizable cash flow,’ he adds.
Kitchen maker Howden Joinery is one. Last year, it increased its dividends by 18 per cent. The final
component of the fund is a smattering of corporate bonds, where Dixon has identified attractive yields and the prospect of a future capital uplift as their maturity approaches. Key holdings include bonds with oil explorer Tullow Oil and doorstep lender International Personal Finance. The Tullow bond is trading at just above 80p and pays interest of six per cent. It matures in 2020 at £1. Dixon says: ‘I see equity value in Tullow but not at a current share price of 246p. But I do see value in a bond to be repaid in four years’ time. It’s akin to an equity-like return.’
Dixon also runs Undervalued Assets, a fund launched to coincide with his arrival at Man GLG. It is run in similar style to UK Income, investing primarily in firms whose shares are out of favour, but without the need to generate an income in excess of the FTSE All-Share.
Assisted by co-manager Jack Barat and analyst Alice Owen, Dixon has earned a solid reputation. Fund analyst Trustnet says that over the long term he has outperformed his peer group more often than not and that ‘good stock-picking has had a material positive impact on results, which have tended to be relatively better in a rising market’. But neither Man GLG UK Income nor Undervalued make an appearance in broker Hargreaves Lansdown’s list of ‘top’ 150 funds.