CRUX European manager, Richard Pease, October 2015

14th October 2015  - One year on from the launch of CRUX Asset Management, Richard Pease, manager of CRUX European Special Situations and the newly-launched CRUX European fund, tells us why he decided to move to a smaller asset management company, gives his views on Europe and his plans for the future.

Richard, 15th October marks one year since CRUX Asset Management gained regulatory approval to set up as an asset management business. Tell us more about the reasons behind the new business and your move from Henderson.

“I've had a long career in fund management and, in the main, it has been with smaller investment houses – first Jupiter in 1990, then New Star in 2001. Henderson was definitely the right company to rescue us when New Star collapsed, but it was a much larger company and the move to CRUX is really me going back to my roots.

“CRUX is the 'start-up' business that isn't. My contract at Henderson was an unusual one, in that I had the option to take the £1billion European Special Situations fund with me if I decided to move. This gave CRUX a great start as, provided the fund's investors were happy to put their faith in me and move with me, it could be a credible business from the start and, in turn, attract some very credible and experienced employees.

“The first nine months were used to set up the operations and mechanics of the business. I myself didn't join until June this year. I was lucky enough to have James Milne move with me. James and I have worked together for a long time and his strengths cover my weaknesses, so it's a really good fit. I've worked with most of the people at CRUX for a number of years at different companies, so it's a team that has been able to hit the ground running, as we know each other so well.

“I have no intention of doing anything other than run money. I'll leave the rest of the business to other people far more competent than me. I also have no intention of leaving – I hope to spend the rest of my working life here, as I hope everyone else does too.”

So you brought the European Special Situations fund across with you and you are now launching a European fund. What are the differences between the two?

“Well the investment process and the types of company in which I invest will be exactly the same. The difference is basically that the European fund will invest more in larger companies rather than medium and smaller-sized companies, which are the bias of European Special Situations. This means that the European fund is likely to be less volatile and may be more attractive to investors wanting to take a little less risk. It will also have a yield, although this isn't a stated objective of the fund. At the moment I expect this yield to be around 2-3%.”

What are your thoughts on the outlook for European equities?

“In 2008/9 we experienced a macroeconomic meltdown. A financial system meltdown followed. Since then we've had pretty much everything thrown at us: Ebola, China concerns, geopolitical issues – you name it, we've had it. So if you look at some of the companies that have withstood all of this and still managed to grow profits and strengthen balance sheets, I'm quietly confident for the future. It will still be bumpy but I think an investment today will look like the right decision in 2-3 years' time.

“In particular, I like companies that can afford to self-finance acquisitions to help them grow. There is a lot of talk about organic growth, which is great, but there isn't anything wrong with buying other companies to grow either, as long as they are sensible purchases. These tend to be the ones that don't make the headlines – not the monster purchases with huge risk, just smaller purchases that are business as usual.

“There are distractions like the upcoming Spanish elections and the VW debacle. With regard to the former, I don't worry about it too much in investment terms. We only hold one Spanish stock in the Special Situations portfolio and that is as a result of what it does, rather than where it is listed. It's a world class company with global sales and isn't reliant on the Spanish economy.

“When it comes to VW,  you could paint a disastrous scenario but I think the balance sheet is strong enough to withstand the pain that is still to come. What they did was stupid. They lied. They probably aren't the only ones and this could drag on, but there are some parts of the industry that were looking compellingly cheap before and are now even more so.  

“Generally, we've had quite a marked correction in recent months. In every other part of life consumers like to buy bargains, not expensive goods but in investment it always seems to be the other way round, which is wrong. Now markets have fallen everyone is terrified. It's not going to be an easy environment for company management, but the good ones are battle-hardened and have seen it all before. I would caution wild optimism, but if you can back businesses that make their own luck, you should be able to make money.”

What are your plans for the future?

“There are no hard and fast plans at the moment. We have just launched the European fund so we will concentrate on that and Special Situations for now. We're in no hurry to grow assets and want to take it a bit steady. There are a couple of people we have our eye on, but its very early days yet. I expect you would see us launch another product in the next year or two though. Watch this space!”