The Scottish Mail on Sunday

The man with only one aim . . . to make you a pretty Penny

- n Jeff Pre­stridge

FUND man­ager Richard Penny is pas­sion­ate about the pro­fes­sion he has pur­sued for more than 25 years. He sees his mis­sion as a sim­ple one – to make in­vestors as much money as pos­si­ble. He backs his in­vest­ment zealotry by putting his own money in the funds he man­ages.

Penny has been ply­ing his trade at Le­gal & Gen­eral In­vest­ment Man­age­ment for 14 years, where he runs two funds – UK Al­pha and UK Spe­cial Sit­u­a­tions. Though UK Al­pha in­vests in the smaller com­pany sec­tor, which has long been his spe­cial­ity, it is at the helm of UK Spe­cial Sit­u­a­tions where he has en­joyed more re­cent suc­cess.

Since tak­ing over the fund three years ago, he has re­warded in­vestors with re­turns ap­proach­ing 50 per cent. Over the past three years, only eight funds among 236 in its im­me­di­ate peer group have racked up bet­ter in­vest­ment re­sults.

Un­der­stand­ably, Penny is proud of the record, es­pe­cially given L&G’s bent to­wards run­ning in­dex track­ing funds – which repli­cate the per­for­mance of spe­cific stock mar­kets – rather than the kind of ac­tively man­aged port­fo­lios he over­sees.

He says: ‘My modus operandi is to try to make as much money as pos­si­ble for in­vestors. It is about de­liv­er­ing cap­i­tal gain, not a mix of cap­i­tal and in­come re­turn. On UK Spe­cial Sit­u­a­tions I do it by hold­ing a con­cen­trated port­fo­lio of 35 stocks. I back my judg­ment by in­vest­ing in the fund my­self. I go about my work to make money, not build a port­fo­lio of tro­phy as­sets.’

There are two main prongs to Penny’s strat­egy. First he only buys shares in firms which he be­lieves are un­der­val­ued. As he says: ‘I do like a bar­gain. I do not want to be stuck in a lob­ster pot that I can­not get out of be­cause I bought shares when they were too ex­pen­sive.’

Sec­ond, he likes to home in on firms where he be­lieves there is a cat­a­lyst for a po­ten­tial im­prove­ment in for­tunes – for ex­am­ple, a new man­age­ment team. He then runs with the po­si­tion, tak­ing some prof­its if the po­si­tion rep­re­sents more than five per cent of the fund’s port­fo­lio.

Though shares are held for two to three years on av­er­age, he is happy to bank quick prof­its if the op­por­tu­nity arises. He did this last June, when in the im­me­di­ate wake of the Brexit vote he built stakes in builder Bo­vis and buyto-let spe­cial­ist Paragon, whose shares fell sharply. He sold out shortly af­ter­wards when they bounced back. He says: ‘If I can make a 40 per cent profit in two weeks I am happy to do it.’

The fund is skewed to­wards stocks with mar­ket val­ues of be­tween £250mil­lion and £5bil­lion, but he is not dog­matic about fo­cus­ing on small to medium-sized com­pa­nies.

If he sees an un­der­val­ued bluechip stock, he will in­vest in the hope of it bounc­ing back, which has hap­pened with his near four per cent po­si­tion in Royal Dutch Shell, bought 18 months ago. Cur­rency weak­ness, trig­gered by last week’s Gen­eral Elec­tion re­sult, could dis­turb the fund’s rel­a­tive short-term per­for­mance be­cause of its low level of ex­po­sure to FTSE100 com­pa­nies earn­ing rev­enues over­seas.

Apart from Shell, the only other Foot­sie mem­ber among the fund’s top ten hold­ings is in­surer Pru­den­tial.

Penny is al­to­gether re­laxed. He says: ‘I would rather be over­weight in small and medi­um­sized com­pa­nies that are en­tre­pre­neur­ial. That is where this fund will make most of its money.’

 ??  ??
 ??  ?? EYE FOR A BAR­GAIN: Richard Penny made a big profit on shares in builder Bo­vis fol­low­ing the Brexit vote
EYE FOR A BAR­GAIN: Richard Penny made a big profit on shares in builder Bo­vis fol­low­ing the Brexit vote
 ??  ??

Newspapers in English

Newspapers from UK