Having taken over the fund the The Share Centre and T1ps founder Tom Winnifrith in the spring of 2012, Webb said he knew managing the £4.3m portfolio would be a challenge but underestimated just how difficult it would be.
Webb Capital’s chief executive said he has a stronger handle on the fund, which finally has liquidity in the fund of around 10% and as such he has been able to initiate new positions.
Webb said the vast majority of the fund had been in breach since he took it on, with most of the incumbent holdings having gone bust or in write-down, although he said this was settling down.
He admitted: “It’s quite remarkable really that the fund is still going and we are extremely grateful to those investors who have remained loyal.”
Specialist finance companies, private client stockbrokers such as Brewin Dolphin, Charles Stanley and Polar Capital were areas of focus, and Webb remains keen on Lighthouse Group.
Chelsea Financial Services “named and shamed” the fund in its RedZone report for significant underperformance over three years, during which the fund declined 60.2% against the stellar performance of many smaller companies funds, whose peer group gained 59.2%, according to FE.
Golden boy 'imploded'
His predecessor Winnifrith, who ran the fund since inception, turned from being a "golden boy" to seeing things "just implode".
"It was a bit like taking over a factory where things just keep creeping up on you and just when you think you’ve dealt with one issue you’re presented with another one.
Webb saved a few companies that had been supported through a recapitalisation or management changes, such as Intandem Films and Mirada, which is his top holding at just less than 10% of the fund.
“Most of them were in an incredibly distressed state. There is a long list of companies about to go into receivership, including Tom’s own company Rivington Street Holdings, which he pumped hundreds and hundreds of pounds into. It’s been a really difficult task due mostly to the large proportion of micro caps in there. When the Chancellor changed the Aim rules last year the fund was up 16% in one month – it was quite interesting to see the performance go up,” he said.
The fund weighting constraints (with no more than 5% in a stock or 40% in a sector) did not help, he said, as he was forced to sell the more liquid holdings in order to honour redemptions.
Despite the fund shrinking by roughly a third of its AUM since he took it over, Webb added he had got rid of all the breaches and that “the minnows are back in fashion”.
Webb said he had no regrets in taking the fund on and was confident he had dealth with the worst of the legacy issues, and as such was starting to promote the fund to close high net worth friends as a good investment opportunity.
