Tell me about the team.
Internally dubbed the ‘A’ Team, we currently employ 10 people. The ‘old guard’ Andrew Morris and Mark Sevier (aka Sevy) have worked together for 40 years. Quite remarkable in the current era. Other senior members of staff have worked together for at least 15 years.
We continue to recruit a new generation of investment, research and other support staff, where appropriate. Supporting personal advancement and seeking to make everyone inclusive and feel part of the team. Working closely together and operating from a single office has been a strength over the years. We remain open minded about expansion, but having the right client-focused, cultural fit is an important factor.
As part of our inclusivity, all staff, after a probationary period, have an opportunity for equity participation. We view this as a key differentiator compared to many businesses in the industry, but particularly one of our size.
How would you describe your investment philosophy?
In extremely simplistic terms, we encourage ‘buy low – sell high’. This translates to a research-driven valuation-focused investment process, a risk assessed investment discipline, alongside a global macro-economic overlay.
Comprehensive research and analysis are key to our investment philosophy. Supported through a number of longstanding professional City relationships and our internally generated insights. This enables us to filter through a large number of companies, funds and other investments, with the process seeking to mitigate risks whilst drawing on our experience to deliver long-term returns. Being valuation focused, an attractive value is key, but not the only consideration. We do not consider ourselves active traders, but recent market volatility has required us to, at times, be nimble to protect client capital.
What is your typical client demographic?
Through Alpha’s relatively brief existence, our clients have been introduced by a range of independent financial advisers, other professionals, as well as a variety of longstanding direct relationships.
Having originated from a traditional stockbroker background, historically a primary focus for investors was equity centric, growth focused portfolios. However, acknowledging everyone is getting older, as clients approach or move into retirement, capital preservation has been a growing feature over the past decade. In recent years, we have been increasingly working with many of the next generation to support families, but also ensure that the younger generation improve their financial confidence and can access financial support when it is needed.
As part of ongoing discussions with professional advisers about passing on assets, where appropriate, Alpha’s AIM IHT Portfolio Service has been successful at supporting many clients. Against a challenging backdrop, our cautious approach has offered a positive client experience. Typically attracting the more mature clients, whilst not necessarily all being natural higher risk equity investors, given broader financial considerations and the potential impact of IHT, our attractive returns and costs have been a hit for many.
What are you bullish on at the moment?
Inflation and central bank policy have been key market drivers in recent years. Against a moderation in inflation and acknowledging a delicate economic backdrop, fixed interest appears increasingly attractive, particularly when compared to historic yields available for much of the past 10 to 15 years. Given the “higher for longer” narrative, investment timing has been a key factor when managing the ongoing volatility in what is perceived to be a lower risk area of investing.
While headlines remain cautious, we believe UK equities are an attractive area for a higher risk investor. A reasonable starting point for valuations, particularly compared to other markets, anticipation of a relatively benign political environment in contrast to the past decade, as well as increasing amounts being invested through corporate M&A and share buybacks. Outside of a global shock, this all point towards the market grinding higher. Whilst the British ISA appears a challenge to administer, an improvement in investor sentiment could offer further support.
What are you bearish on at the moment?
Despite a range of global concerns in recent years, the global economy and investment markets continue to defy many commentators’ predictions. Against a few increasingly dominant US technology companies, the latest talking point for many bullish investors is Artificial Intelligence, which are having an increasing effect on US, and ultimately global, equity indices. Being valuation focused, and with memories of many bubbles, we are closely monitoring. For us, this appears a key risk for headline market performance.
At present, key AI beneficiaries have been chip makers, but for these investments to be successful over the longer term, traditional industries must embrace AI, by identifying productivity improvements and ultimately adopting the technology. Rather than the immediate gains that have been made in recent months, it is likely to become a 5-to-10-year process. However, recent market moves appear to have accepted the hype, without considering the broader, longer-term implications and realities. We continue to monitor with interest. Although headline indices may struggle if the share prices of these US tech titans can’t continue to rise at the rate of recent years given their size, we believe the economic benefits of the technology should be supportive of broader market growth.
What are your top three fund or stock picks right now and why?
Given the backdrop, fixed interest and large parts of the UK equity market appear highly attractive to us. However, it is rare to find such widespread discounts in the UK-listed investment company sector, across a broad range of underlying investments and assets. This seems to have prompted a significant increase in Board and corporate activity, which has been largely absent for much of the past 20 years. The recently introduced Consumer Duty and lacklustre support for UK investments are likely catalysts, not helped by a series of mega-mergers and takeovers in the wealth management industry over recent years. This will have inevitably created increasingly concentrated shareholder bases, potentially leading to “no further buying”, or perhaps even forced selling, over risk management concerns. Against these evolving challenges for the industry, we believe a range of interesting opportunities can be identified:
· Temple Bar provides exposure to a longstanding value strategy, and successful management team, focused on UK equity income. Despite recent underlying returns, the discount has expanded, offering an attractive point to invest in what we view as an appealing area and investment strategy.
· Schroder Asian Total Return offers access to a conservative Asian investment strategy and experienced team, with the added flexibility to use derivatives to mitigate market and country risks, where appropriate. The region has appeared attractive for some time, albeit headline returns are increasingly dictated by expectations of Chinese policy. Whilst an improvement in investor sentiment may offer some further excitement, the team continues to generate positive returns in the meantime.
· Chrysalis invests in private equity growth opportunities that are approaching a valuation realisation event, often a market listing. Whilst the broader private equity sector has been under the spotlight in recent years as listed markets have not been accessible, its portfolio is becoming increasingly mature. Whilst there have been some corporate distractions, we believe there should be a number of positive drivers over the coming months, further by a general improvement in listings, which remains a hot topic and has become an increasing focus of Government policy.