e-fundresearch: Mr John Surplice, you are the fund manager of Invesco Pan European Equity fund (ISIN: LU0100598282). Since when are your responsible for the fund management?
Surplice: July 2003
e-fundresearch: Which benchmark do you adhere to?
Surplice: MSCI Europe.
e-fundresearch: Are you also responsible for other funds at the moment?
Surplice: Yes. A Hong Kong distributed version of this strategy and the Continental European segment of the Invesco Global Equity products.
e-fundresearch: What is the total volume that you manage in all your funds?
Surplice: Euro 852.
e-fundresearch: Regarding the performance: which performance did you achieve since the beginning of the year and in the years 2007-2011? Absolutely and relatively to the relevant benchmark?
Surplice: In 2011 on a gross basis, the fund returned -6.8% versus index of -8.1% (in €). Over 2007-11 the fund has delivered -11.9% versus benchmark -22.2%.
e-fundresearch: How content are you with your own performance in the last years and this year?
Surplice: We target two things. Outperformance and consistency. We do not believe in a strategy that enjoys huge outperformance in one year only to underperform materially over future years. Therefore, while we are never fully satisfied, we are pleased to have delivered consistent 1st or 2nd quartile performance against our peers for every year bar one since we took over the management of the fund in mid 2003.
Our attention to valuation has led us to invest in certain cyclical parts of the market during 2011. The early part of 2012 has seen strong outperformance from some of these areas. We retain a balance between these companies and other less cyclical businesses. In all cases we believe the valuations to be attractive and see that as the key to generating consistently positive returns.
e-fundresearch: How are you able to deliver added value for your investors with your performance?
Surplice: We believe that we can deliver added value by working harder to understand businesses, their drivers and the drivers of valuation. We spend many hours visiting companies and researching them. In many cases we may take contrarian decisions, buying into out of favour businesses where the market’s attention has yet to be attracted. We will go where the valuation opportunities take us. Over time, we believe that by investing in undervalued businesses we will be able to generate consistent outperformance.
e-fundresearch: How long have you been a fund manager already?
Surplice: Since 1996.
e-fundresearch: What were your biggest successes and your biggest disappointments in your career as fund manager?
Surplice: When you make 100s of individual investment decisions every year, mistakes are a fact of life. What is disappointing is when you fail to learn from mistakes and don’t use them to adapt your behaviour going forward. I think I’ve been reasonably successful in learning from individual mistakes or disappointments.
e-fundresearch: What kind of capital market situation do we have at the moment? How do you act in this environment?
Surplice: Capital markets are fearful, volatile and with a high equity market risk premium. The same disciplined investment approach doesn’t change but you can be greedier: in such a market environment there are more, not less, attractive value investment opportunities.
e-fundresearch: What are the special challenges in this environment?
Surplice: It’s very easy to lose sight of the long term investment potential in a company if you become too focused on managing short term risk and share price volatility.
e-fundresearch: What objectives do you have till the end of the year and in the mid term for the upcoming 3 to 5 years?
Surplice: After a decade of zero returns in equity markets, my objective for the future is to deliver positive returns for investors that are attractive relative to other asset classes when adjusted for risk: given current valuation points for equities and bonds, I’d be surprised and disappointed if that were not the case.
e-fundresearch: Do you model yourself on someone? Any ideals?
Surplice: In life: my father. As I have never met anyone who matches his level of honesty and integrity. This is not an easy business and whilst I recognize individual investment decisions will be questioned at times, I would always hope my personal and professional integrity would remain beyond reproach.
e-fundresearch: What motivates you in your job?
Surplice: Making investors money. It’s not a complicated business.
e-fundresearch: What else do you want to achieve or do you have any further aims as a fund manager?
Surplice: Well, I think my achievements to date have been pretty limited! In a world of low interest rates and low (government) bond yields, I think the innate attractiveness of equities has largely been lost on investors. My objective is to not only deliver decent returns, but encourage more investor participation in equities.
e-fundresearch: What other profession would you have taken interest in, apart from becoming a fund manager?
Surplice: My main interest at school and university was economics and my first professional qualification was as a Chartered Accountant in 1995. Fortunately both disciplines have proved very useful in my current role.
e-fundresearch:Thank you for the interview!