‘Bud­get give­away? We are stay­ing cau­tious’

The Daily Telegraph - Your Money - - INVESTING -

The eyes of the City were on the House of Com­mons on Mon­day as Philip Ham­mond de­liv­ered his lat­est Bud­get to Par­lia­ment. But how much ef­fect do the Chan­cel­lor’s words have on in­vestors? While Mr Ham­mond may have de­clared an end to aus­ter­ity, does this have any im­me­di­ate im­pact on the mar­kets?

Adam Avig­dori, co-manager of the £380m Black­Rock UK In­come fund, told Tele­graph Money that a change in the Chan­cel­lor’s rhetoric on aus­ter­ity would not cause him to make im­me­di­ate changes to the port­fo­lio.

Who is the fund for?

The fund’s ob­jec­tive is to de­liver a to­tal re­turn for in­vestors, with good cap­i­tal re­turns and a grow­ing div­i­dend. Our div­i­dend has grown for 30 years.

How do you pick your hold­ings?

As an in­come fund we are pre­dis­posed to lik­ing com­pa­nies that pay big div­i­dends. But a big­ger char­ac­ter­is­tic we look for is the “free cash flow” of a busi­ness – cash that can be rein­vested in the busi­ness or given back to share­hold­ers.

We look for busi­nesses that have a com­pet­i­tive ad­van­tage, such as a unique ser­vice, tech­nol­ogy or ge­o­graph­i­cal po­si­tion. We are very open-minded, but our hold­ings are of­ten com­pa­nies that are less cap­i­tal­in­ten­sive and need less cash to grow. We want to in­vest in firms that can adapt to tech­nol­ogy, reg­u­la­tion and con­sumer be­hav­iour.

Are there any sec­tors you avoid?

We don’t have any hold­ings in the tele­coms sec­tor any more. It is hard for these com­pa­nies to gen­er­ate cash and it is very ex­pen­sive for them to op­er­ate, as they need to buy mo­bile “spec­trum” and con­tin­u­ally in­vest in their net­works.

We also avoid com­pa­nies that have been de­pen­dent on cheap debt.

CV: Adam Avig­dori

Mr Avig­dori joined Black­Rock in 2006 when Mer­rill Lynch In­vest­ment Man­agers merged into the firm. He grad­u­ated from the In the next few years we think the debt mar­ket will get se­lec­tive about which busi­nesses it sup­ports. We want com­pa­nies that con­trol their own des­tiny.

Black­Rock’s Adam Avig­dori tells Adam Wil­liams that the end of aus­ter­ity won’t af­fect the way in which he in­vests

How have you re­acted to the re­cent stock mar­ket falls?

We haven’t changed a great deal in the fund, even though the eco­nomic en­vi­ron­ment is not as good as it has been. This year we have been slightly cau­tious, and we think that’s the right ap­proach.

As a UK-fo­cused fund, does the Bud­get have a big im­pact?

We won’t make any changes now, as we don’t in­vest on the ba­sis on what the Gov­ern­ment may or may not do.

But we have def­i­nitely seen a change in rhetoric from the Gov­ern­ment. For the past eight years it has been fo­cused on the coun­try’s bal­ance sheet, but this Bud­get sig­nalled the end of that. What sur­prised us was just how much the Chan­cel­lor gave away in the end.

Clearly the Gov­ern­ment is look­ing to in­crease pub­lic spend­ing. We can de­bate whether that is good or bad, but we haven’t had grow­ing pub­lic spend­ing for a long time. What they will do af­ter Brexit, we don’t know, but it does seem like they’ve drawn a line un­der aus­ter­ity.

What has been your big­gest suc­cess of re­cent years?

Con­sumer sta­ples have per­formed re­ally well for us. When you’ve got busi­nesses that have very strong con­sumer loy­alty, they sup­port very strong growth over a long pe­riod.

We be­lieve there is more growth to


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