e-fundresearch: Which benchmark do you adhere to?
Heslop: The benchmark for performance measurement and for risk management is the HSBC European Smaller Companies Index, although the portfolio may differ markedly from the index.
e-fundresearch: Are you also responsible for other funds at the moment?
Heslop: Yes, I am responsible for the management of some institutional assets which are managed on a similar basis to the Fund.
e-fundresearch: What is the total volume that you manage in all your funds?
Heslop: EUR 32m, I am part of a 3-strong team which manages around EUR2bn of European small cap assets.
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?
e-fundresearch: How content are you with your own performance in the last years and this year?
Heslop: My contentment is of less importance than that of my clients. I strive to outperform the index and competing funds whilst taking an appropriate level of risk; to date I have been successful in doing this, so I believe my clients have some reason to feel satisfied with progress. The challenge is always to look forward (ie to work continually to achieve future outperformance) rather than to be complacent about past successes.
e-fundresearch: How are you able to deliver added value for your investors with your performance?
Heslop: I am fortunate to be surrounded by an able group of colleagues who have contributed to the success of the fund. We always work as a team, and the basis for our approach is to seek out companies with robust business models and strong pricing power; this enables them to deliver consistent, visible and repeatable strong returns over longer periods. Companies with high barriers to entry and pricing power are able to sustain high returns for longer than the market tends to assume.
e-fundresearch: How long have you been a fund manager already?
Heslop: I have been a fund manager since 1st July 2008, but worked in the securities industry analysing stocks for nine years before that.
e-fundresearch: What were your biggest successes and your biggest disappointments in your career as fund manager?
Heslop: It is difficult to single out individual successes and disappointments. Successes have included our investment in Chloride, the UK uninterrupted power supply manufacturer, which was broadly owned across funds and was bid for by Emerson of the US in 2010 at a 79% premium. We have also benefitted from our ownership of the global chemical distributor, Brenntag which has delivered an annualised 30% return since its listing in early 2010. We have been disappointed by the performance of the French nursing home groups, Medica and Orpea, which have continued to perform well from an operational perspective, but have been consistently derated by the market. We continue to maintain our positions in these names as we believe market fears are misplaced.
e-fundresearch: What kind of capital market situation do we have at the moment? How do you act in this environment?
Heslop: Deleveraging and austerity will likely result in low economic growth for the Eurozone as a whole and will test the strength of corporate models. While some companies will struggle to keep their heads above water in this environment the strong will get stronger. Some businesses will even grow faster as a consequence of the side effects of deleveraging. The weak Euro continues to advantage European exporters, helping them to further develop their positions in fast growing emerging markets. Valuations in Europe remain attractive and balance sheets are strong, we therefore see upside potential in the market as a whole and expect M&A and share buy back activity to increase.
Our approach to investing is no different in this environment as to any other. i.e. we continue to focus on companies with sustainable pricing power with exposure to long term growth themes. The economic backdrop is simply an input into our business analysis.
e-fundresearch: What are the special challenges in this environment?
Heslop: The biggest challenge in the current environment is volatility and the impact of government/central bank policy on investor appetite and liquidity. Political indecision was in part responsible for the strong sell off in equities last summer. Large inflows of capital to the market, while not solving the root cause of Eurozone problems, have subsequently eased market concerns over a liquidity crisis and resulted in a strong recovery in markets. Policy decisions are difficult to forecast, but are likely to continue to be key drivers of short term performance.
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?
Heslop: Our objective is to continue to deliver superior long term performance relative to our peers and our benchmark. We are continually stress testing our investment ideas to changing valuations and market dynamics. The search for better investment opportunities is never ending.
e-fundresearch: Do you model yourself on someone? Any ideals?
Heslop: I do not model myself on anyone. Above all I value honesty and integrity.
e-fundresearch: What motivates you in your job?
Heslop: I am very fortunate in my profession to have access to the broadest array of management teams and businesses. This makes the job enormously interesting and enjoyable. This, coupled with my inherent competitive instincts, are more than sufficient to motivate on a day to day basis.
e-fundresearch: What else do you want to achieve or do you have any further aims as a fund manager?
Heslop: Professionally my goals are simply to deliver the best long term performance that I can.
e-fundresearch: What other profession would you have taken interest in, apart from becoming a fund manager?
Heslop: From an early age my ambition was to be a vet, a far cry from the world of fund management.
e-fundresearch: Thank you for the interview!