Volkswagen: A company with "tremendous" green credentials? At least one fund manager thinks so.
Richard Pease, the jovial Crux European Special Situations (GB00BTJRQ064) manager who left Henderson in June, is a self-confessed optimist. But surely a positive view on his holding in Porsche, "horribly punished" as a result of the VW scandal, is a step too far?
"I suppose that we will have occasional little trading ideas which don't work out," he demurs, sweeping the air expansively with his glasses. "But we've been horribly punished because of VW. I think it really is not as bad as the valuation suggests. It's knocked us by the best part of 40 basis points (bps)."
With the air of someone about to say something deliciously controversial, he adds: "Ironically, in terms of their progress in electric cars, VW's green credentials are tremendous, despite the porky pie to our American friends." The company led global car sales in the first half of 2015, selling 5.04m cars to June. "You can spend research and development (R&D) on that basis, which it does."
Mr Pease has only been out of Henderson a matter of months but the high-profile manager, now ensconced in a glossy boardroom overlooking Green Park, is clearly enjoying being back in the saddle, particularly when the horse is his own. His brainchild, Crux Asset Management, is only four months old with just 12 members of staff, giving him all the room he needs to take the kind of risks involved in a stock like VW.
"We went off piste when we took the 1 per cent position in Porsche," he admits. "I think it was the smart way to play VW. Okay, maybe it wasn't smart to play VW," he interjects with quick laugh, "but if you did, the smart way would be through Porsche because we got a 30 per cent discount (compared with buying VW).
"We were buying it adjusted on four times earnings but for a company which has - maybe not for much longer," he says, checking himself, "but still has - €22bn, it's not going to go bust tomorrow, so it's very hard to be completely disproportionate."
"Bear in mind only 3 per cent of the cars are diesel anyway and bear in mind no one's been killed here," he exclaims with another air-borne gesture of the glasses. "There's a limit to how ridiculous you can get.
"The bearish argument would be much more to do with the additional cost of financing cars. But that's not the end of the world if you go through the numbers - 40 per cent of cars are done through finance but you don't borrow 100 per cent of the cost of the car.
"Is it the complete death of VW? I doubt it."
So is it time to buy more then? "I'm not a hero," he says, "and I don't normally do this, but I would say that we probably should."
Richard Pease CV Mr Pease has been running European funds for over 20 years. In 1989 he moved to Jupiter from the Central Board of Finance for the Church of England where he set up the Jupiter European Unit Trust. In 2001, he helped set up New Star Asset Management. When Henderson Global Investors acquired New Star in April 2009, he became a Director of European Equities. He ran Henderson European Growth and started Henderson European Special Situations before leaving to set up Crux Asset Management. |
The fund, which transferred to Crux from Henderson on 8 June (Mr Pease was contractually entitled to bring it with him from Henderson), has kept its Special Situations name. But that name refers more to Mr Pease's licence to wander off benchmark than a desire to pick out opportunities in the macro trends. In fact Mr Pease is dismissive of macro trends in general, but he is keen to naysay the market gloom over China and Europe.
"We want companies who dominate niches and, yes, that means we've got exposure to China, boo hoo, it's great! Why wouldn't we want exposure to China, it's growing and that shouldn't change just because it's unpopular at the moment.
"I'm an optimist. Of course, I'm an optimist," he says, sliding his glasses off his nose again to stab the air. "When you run an equities fund you have to be an optimist. But it pays to be one. Otherwise we might as well all go and die," he laughs.
He has now launched another European fund to sit alongside European Special Situations. He insists this is not a new fund but rather a mirror of the Henderson European Growth Fund (GB0030617707) he left behind, now managed by Henderson manager Simon Rowe. Unlike that fund, Crux European Fund will pay an income, although Mr Pease says: "We don't want to be driven by income because I think people make bad decisions when they're chasing yield. I don't want to spend all my life worried about cutting the dividend, that's not what I do but I do have five kids to feed so I do need the income, I understand that."
In comparison to the European Special Situations fund it will be invested in larger stocks - typically over 60 per cent in stocks over €10bn euros whereas the Special Situations fund has more than 60 per cent in stocks under €10bn euros. The fund will also be able to hold more in Switzerland which the Special Situations fund is restrained from.
