James de Uphaugh’s investment industry career stretches back more than three decades but the past three months rank as the toughest the fund manager has ever worked.
“Crises don’t get any bigger than this one,” says the executive chairman and chief investment officer of Majedie Asset Management, the UK investment company. “It has been incredibly intense.”
Speaking by video call from his home in Hertfordshire, one of the leafy counties that surrounds London, Mr de Uphaugh is softly spoken but firm in his views: the pandemic, the shuttering of global economies and the subsequent reopening will drive a fundamental reshaping of business as we know it.
“What companies are going to find is a dramatically different competitive environment,” he says. “It is genuinely going to be Darwinism on steroids. The best businesses are really going to be able to crunch the competition coming out of this.”
Mr de Uphaugh is measured and relaxed during the call, quick to joke and to laugh at himself, including when I mention that his wedding in 1994 appeared in Tatler, the British society magazine. “They were different days,” he says.
He is at ease in front of the video camera, despite protestations of a preference for in-person conversations. “I like seeing companies face to face. I like seeing clients face to face,” he says. “We are having a good conversation here. But if we were meeting face to face, there is an extra dimension.”
Such preferences were put to the test as Mr de Uphaugh and the Majedie investment team retreated to their homes as the coronavirus crisis unfolded. With governments around the world quickly locking down their economies, the Majedie team refocused their investment analysis to look at the “days of liquidity” at businesses, spending hours speaking to each other and companies as they tried to understand which businesses had enough cash to survive the shutdown.
Majedie Asset Management
Assets under management £8.5bn (at 30 May 2020)
Ownership Employee-owned; Majedie Investments PLC owns a minority 17.1% stake
Even before the pandemic sell-off, Mr de Uphaugh was grappling with a heavier workload after taking over the running of the Edinburgh Investment Trust in early March.
Majedie won the contract to run the £1bn investment trust after one of the UK’s best known stock pickers, Mark Barnett, was fired for bad performance. Mr Barnett had worked at Invesco, one of the world’s biggest fund managers with $1.2tn in assets, while running the trust. Majedie in contrast oversees just £8.5bn, including the trust.
“The Edinburgh Investment Trust was a big win,” says the portfolio manager, who set up the London-based fund house with colleagues in 2002. “It is a big responsibility.”
He adds there are advantages for asset owners when it comes to using a boutique manager. “Boutiques can be very powerful from a client perspective. They know that if they appoint you, it really matters to us. This is a £1bn mandate in an £8bn business. That is substantial.”
Mr de Uphaugh was putting his own stamp on the trust just as the coronavirus sell-off hit markets. With a wry smile, he says: “Over quite an intense period in March, while markets were quite interesting and very, very volatile, this [repositioning of the portfolio] was taking place.”
It was a brutal overhaul — he kept just six of Mr Barnett’s holdings by choice, as well as a few others that proved difficult to sell. “You can’t just go for a gentle inheritance,” says the 54-year-old, who favours a flexible investment style with a total return focus in contrast to the old manager’s preference for so-called value stocks.
As part of the revamp, Mr de Uphaugh ditched British American Tobacco — the trust’s largest holding — while adding gold miners, banks and telecoms companies. “We have made a good start on the new portfolio,” he says.
The active fund industry, where fund managers pick stocks, has been accused of closely following benchmarks while charging high fees in recent years — a practice known as closet tracking. Majedie, in contrast, has a reputation for taking punchy bets.
Despite its size, Majedie often appears as a large shareholder in businesses because of the stakes it takes. In the Edinburgh Trust, for example, Mr de Uphaugh is significantly overweight in Tesco, the retailer, Mondi, the packaging company, and defence group BAE Systems — with an allocation of at least 3 percentage points more to the companies compared with the benchmark. Majedie counts as a top 20 shareholder in each of the three businesses, according to data provider CapitalIQ, sitting alongside fund houses that oversee trillions of dollars in assets.
James de Uphaugh
Born June 1966, London
Total pay not disclosed
1985-88 Economics, Jesus College, University of Cambridge
1988 Mercury Asset Management, graduate trainee, equity analyst
1992 Mercury AM, UK equities fund manager
1999 Mercury AM, managing director, member of asset allocation committee
2001 Mercury AM, UK alpha team CIO
2002 to present Majedie Asset Management, chairman and chief investment officer
But there have been big problems in the active industry. The closet tracking scandal, the implosion of Neil Woodford’s UK investment business and disappointing performance from high-profile active fund managers such as Mr Barnett have cast a shadow. “Like in any industry, there are elements of the competition that don’t live up to their label. All we can do is be genuinely active.”
As for performance, Mr de Uphaugh’s portfolio outperformed the FTSE All-Share index, net of fees, by 2.8 percentage points per annum between December 2006 and February 2020. His UK equity fund has slightly outperformed the index over three months and a year, but not over three years and five years.
“Active managers often do best when actually we are seeing a sharp change, in crises or the likes,” says Mr de Uphaugh. “This is what makes me optimistic for Majedie’s UK funds and frankly for good active managers in this period, because these [market] discontinuities are good for active.”
His fund performance affects his pocket in more ways than one: Mr de Uphaugh’s pension is entirely invested in Majedie funds, as well as a “substantial” amount of his personal wealth. “Our mantra is we don’t want to launch a fund unless we are willing to put chunky amounts of our own assets in the funds.”
He is well paid for his work. The four executive directors at Majedie, including Mr de Uphaugh, were paid £15.7m in 2018, the most recent year the company has filed accounts for. The highest paid director — who was unnamed — received almost £7.7m for the period.
The conversation turns back to how economies and companies will emerge from the pandemic. He says the huge stimulus coming through from fiscal and monetary policy and the low oil price will help the recovery. But he adds: “What I think will be more important from an investment management perspective is having the right companies which can emerge stronger.”
The father-of-three is spending a lot of time thinking about which companies can survive and which will not. “There will be a lot of businesses up for grabs. A lot of competition will be walking wounded, licking their wounds.”