Richard Buxton, one of Britain’s most well-known fund managers and a 40-year veteran of the industry, has warned about the “very sad state” of UK equity markets as he prepares for retirement.
Buxton, who leaves Jupiter Asset Management this month, said that the UK market’s shrinkage was the most dramatic development of his career. He said that it will take years for the decline to be reversed, but that there have been many positive changes in the City.
His warning comes after British Chipmaker Arm chose to list in New York instead of London, and CRH – the world’s biggest building materials group – switched its primary listing to New York.
According to the investment bank Peel Hunt 61 fewer small companies are included in the FTSE SmallCap Index today than five years ago.
Buxton began his career in 1980s. He made his name as an investor who only held long-term investments of about 30 shares.
According to Trustnet, he outperformed most of his peers for the majority of his career. However, in 2018 and 2020, he fell behind.
“What’s changed is that in the first half of my professional career, there was a large, liquid pool of savings focused on investing in equity — pension funds and insurers.”
He said that an “unholy trio” of accountants actuaries, and regulators “completely eroded the equity-oriented saving pool. . . Such that the UK equity markets is now in a very sad state with no natural investor”.
Buxton spent most of his career with UK fund manager Schroders, and was known for his outspokenness on governance issues.
He said, “I have a reputation as someone who is outspoken and intervenes.” “I’ve tried to make changes when I disagreed quietly with a company.”
“Only when this doesn’t work have I gone public. And usually, other fund managers contact me to say they agree with my opinion.”
He began his career at Brown Shipley before moving to Baring Asset Management in 1985 as the head of UK equity. In 2001, he moved to Schroders and in 2013, he switched to Old Mutual Global Investors.
He became Old Mutual’s chief executive and led a management-led buyout, with the support of private equity firm TA Associates. Merian Global Investors was renamed and sold to Jupiter for £370mn in 2020.
Global fund management has undergone a radical transformation in the last decade. From a culture of stockpickers who were “stars” to accelerated growth of index-tracking low-cost products.
The growth in exchange traded funds has led to a reduction of fund management fees, and a focus on performance.
Buxton said, “The market and the City have changed a lot since I began working there just before Big Bang.” The traditional City lunch, a drinking culture that was pervasive and a male-dominated environment were all part of the scene. “Much has changed for better.”
Buxton recalls that despite having a few corporate governance spats he was particularly upset when Stuart Rose tried to violate the UK corporate code and change from Marks and Spencer’s chief executive to the executive chair back in 2008.
Rose ignored shareholder objections and retained the position, but Buxton said, “The deputy chairman told me after, ‘you won the battle, but lost the war’. Other companies realized they couldn’t do the same thing without being questioned.”
Buxton, a long-time shareholder in certain banks, said that he had urged Treasury to not nationalise all the banks during the financial crisis of 2008.
He said, “I have lived through many crashes or panics,” from the 1987 market crash to the coronavirus epidemic.
“Bear markets can be far more dangerous than panicked collapses. You don’t have the time to alter your portfolio, but you can add to your positions immediately at ridiculously low prices.
“But you need to have a strategy to minimize losses, to survive and to try to determine the right moment to buy very low-priced stocks at the end of the market for an upturn.”
Overall, he stated, his career was “hugely fun”.
The opportunity to quiz senior managers on their businesses, strategies and management from a young age has been an enormous privilege.