Our growth is solid even if we live in the shadow of ‘super-tankers’
AS MANAGER of a UK investment fund, Neil Veitch sees his mission in simple terms – to beat the performance of the FTSE AllShare Index on a consistent basis.
So far, so good. Since taking over at the helm of SVM UK Opportunities in early 2006, he has outperformed over the past one, three, five and ten years.
But Veitch has yet to receive the plaudits his sterling work arguably deserves – few actively managed UK funds outperform so consistently for so long.
Despite its record, the fund is shunned by most investment advisers and investors. With assets of £149million, it remains a fund minnow.
Veitch hides his frustrations well, preferring to be phlegmatic. He acknowledges that a small investment group such as SVM Asset Management faces challenges to get its name before those recommending or looking to buy a UK equity fund.
He says: ‘It has become more difficult since the financial crisis. More investors now opt for lowcost index-tracking funds. There is also a tendency among advisers to stick with big fund management groups. Last but not least, investor appetite has concentrated on income and some of the super-tanker UK equity income funds. We’ve lost out as a result. We don’t have an offering in that space.’
Veitch is determined to soldier on in the hope that recognition will come eventually. Like many UK active fund managers, he views himself primarily as a stock picker. To outperform, he believes the best approach is to build a portfolio that is widely different from the FTSE AllShare, while ensuring no stock position or sector exposure gets so big that it raises the fund’s risk profile to a dangerous level. Having said that, the fund’s top ten holdings account for more than 50 per cent of assets.
It results in a portfolio of wellknown companies – such as BP, GlaxoSmithKline and Lloyds Banking Group – and lesser known ones such as engineer Bodycote and packaging firm RPC Group (the biggest holding). The bias towards cyclical firms reflects Veitch’s belief that the UK economy is in growth mode.
Unlike most rivals, he has the flexibility to short-sell shares – that is make money when a company’s share price slides.
It is a subject he is a little touchy about, refusing to give examples where shorting has proved beneficial. He says revealing such information would deny him access to company management. But the fact that the fund tends to perform relatively better when markets are falling than rising suggests that shorting has been successful – the exception being 2008.
The fund typically has five to ten short positions, against 40 to 50 long holdings.
Like all of SVM’s investment team, Veitch is based in Edinburgh, a city that he says enables investment managers to get away from some of the ‘noise’ that affects those who work in the more febrile surroundings of London. ‘I can sit back here and take a more dispassionate view of companies,’ he adds.
As well as UK Opportunities, Veitch runs SVM World Equity and supports Hugh Cuthbert with the All-Europe fund.
Set up in 1990 by Colin McLean and wife Margaret Lawson, SVM has £650million of assets under management. The business is majority owned by McLean and Lawson, who co-manage UK Growth, SVM’s flagship fund.