Cash, growth and turnaround... how Mark’s back in the Black
IT IS just over three years since fund manager Mark Wharrier returned to investment house Black Rock after a ten-year absence working for a rival.
It has been a triumphant return for the UK equity income specialist who started out as an investment manager at Mercury Asset Management, a British company that was taken over by US giant Merrill Lynch in 1997. In 2006 Black Rock merged with Merrill, creating one of the world’s largest asset managers.
Wharrier is now Black Rock’s head of UK equity income portfolios, responsible for assets in excess of £1billion. Along with Adam Avigdori, he manages Black Rock Income and Growth, a £51million investment trust that until mid-2014 was run by Allianz RCM and called British Portfolio.
He also manages with Avigdori and David Goldman the £357million Black Rock UK Income. Both funds are run along similar lines with near identical portfolios.
Since Wharrier’s return, the funds have been overhauled to reflect his view on how equity income investing can best work for the benefit of investors.
‘We needed to introduce a new algorithm for the times we live in,’ he says. The result is a three- pronged approach. At UK Income, for example, Wharrier is seeking to invest 70 per cent of the assets in firms that have a sustainable dividend and are generating plenty of cash, such as British American Tobacco and consumer goods giant Unilever.
A further 20 per cent is invested in growth companies that generate less income but can boost the fund’s performance. Cambridgebased technology company ARM Holdings was a big contributor to the fund’s performance in the runup to it being bought in the summer by Japan’s Soft Bank.
The other ten per cent is invested in what Wharrier describes as ‘turnaround companies’ – fundamentally good businesses where the share price does not reflect the firm’s true value.
‘We hold Tesco on the basis it is in turnaround,’ he says. ‘We like the new management team led by chief executive Dave Lewis, it remains a market leader and its prices are competitive.’
The overall battle plan seems to be bearing fruit. Over the past three years, UK Income has comfortably outperformed the FTSE All-Share Index and the average UK equity income fund (as has Income and Growth). Brexit and US President-elect Donald Trump do not frighten Wharrier. He sees them more as challenges that good active fund managers should respond to in a positive fashion.
He says: ‘Yes, I am sure that in the coming months we will see more market volatility as issues such as world trade come to the surface. We must search all the time for robust firms that will generate returns through such periods of uncertainty. We need to be imaginative.’
He adds: ‘As a fund manager, it is gratifying that I can always find shares to suit a particular economic, financial and political backdrop. It’s why equities are such great investments.’
Three managers running one portfolio is unusual, but Wharrier says it works. ‘It’s all about using the best company ideas from the three of us. Yes, it leads to vigorous debate on occasion and a little tension, but we get there in the end. If we can’t agree I tend to get the casting vote.’
Currently, UK Income holds 40 stocks – low for an investment fund. The yield is a touch above four per cent and dividends are paid on a quarterly basis.