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THE INVESTOR
Viewpoint
RichardPeirson,
AXAInvestmentManagers
The highly experienced
fund manager surveys
the economic landscape,
the challenges and
secrets of success
Youhavebeena fundmanager
formore than30years.What are
thekey lessonsyouhave learned?
There are quite a few – here are the
main ones. Dividends are the key to
equity investment: the main reason
to invest in equities rather than
government bonds is to get a growing
income from growth in dividends.That
can only be paid from consistently
growing earnings, and from consistent
cash ow. Investors who ignore cash
ow do it at their peril.
A good management team is
needed to deliver these things.An
important part of a fund manager’s
job is to identify good management
teams, who under-promise and
over-deliver; who can clearly
articulate what the company is doing
and its plan for the future.
We are looking for growth but it is
important not to overpay for growth.
It is an awful US acronym, but we
want GARP – growth at a reasonable
price. It is very easy to get carried
away with a theme or a story, but you
need to be disciplined. Businesses
THE INVESTOR CENTRE
can’t continue to grow rapidly
forever, so you need to be very
circumspect about how much
you will pay for growth.
Working with a team is essential:
no one individual has a monopoly on
ideas or can understand all parts of
the market. It is short-sighted to
ignore areas you nd di cult;
instead it is important to work with
others who do understand those
areas so that you are not missing
out on opportunities.
Run with your winners.That is
especially important if you are
investing in small companies as they
nd it easier to grow. If you hold on
to your successful small companies,
they will become big companies and,
hopefully, will eventually join the
FTSE 100 Index.That is the way you
make serious money.
What haveyou learnedabout
themarkets?
One should not try to second-guess
the markets.As a long-term investor,
it is far better to remain fully invested
rather than trying to achieve perfect
market timing. If you lose out on a few
good days it can seriously undermine
investment returns. Even good fund
managers only get about seven out of
10 decisions right. It is important to
recognise your mistakes and move
on quickly.
Developing the ability to identify
THE FUND MANAGER VIEWPOINT