You don’t need to own everything”, is a piece of advice Liontrust’s Anthony Cross shares as we talk about his career. “It’s not particularly deep or insightful, but there is something about it,” he smiles, crediting the quote to his former Schroders colleague Andy Brough.
Cross adds: “There is a danger that fund managers are so frightened of what they might be missing out on, they scramble around too much, do too many meetings and end up not knowing their companies well enough.”
Spreading his wings
When Cross left Schroders to join Liontrust, it was driven by “a real desire to see whether I could do it”. And having that time to run money solo helped him understand what type of manager he is.
It all started with creating his investment framework, which he has refined over time. “You build yourself a set of rules, a process around which you make investment decisions,” he explains. “Along that journey, in the first few years, you learn what works and what doesn’t. Most importantly, you start to understand what sort of investing suits you.”
Some managers are good at short-term trading, “they like the excitement and pressure of trading in and out of stocks”. Others really enjoy the macroeconomics, he says. For Cross, who doesn’t enjoy the day-to-day volatility of the market, his personality is best suited “to finding strong business models that can compound growth over a long period of time”.
Markets may not sleep, but Cross is adamant that managers need to get some distance – a piece of advice he takes quite literally. “Investing is quite intense. There is no beginning, middle or end, it’s constant. You are being measured all the time when it comes to performance. It’s really important to try and find some form of perspective.”
For Cross, that involves spending time in a remote part of Scotland. “Having a place, fun family time, hobbies etc is really important to unclutter your mind and also make one realise that if things aren’t going well, it’s not going to last forever.”
While the move to Liontrust in 1997 gave Cross the opportunity to find his bearings and fly solo, he is quick to acknowledge his team. “One of the ways to help deal with difficult times is to make sure you’ve got a good team of talent with you.”
He is a proponent of hiring people you know, and has professional and personal relationships with his team that go back years, if not decades. But it is not a case of recruiting “mini me’s”, Cross adds.
“We are all quite different and we respect each other’s differences. We all have certain talents and weaknesses, and we try and look out for each other and compensate for one another.”
Staying the course
Cross’ longevity at Liontrust is also a benefit, he says. “Managers who hop around have to restart their track record, rebuild their teams, get to know everyone and build relationships within the company. If you have got that longer-term track record, that helps calm you down and you’re not fretting about the three-year numbers.”
Back in 1984, Warren Buffett paraphrased American economist Ben Graham, saying, ‘In the short run, the market is a voting machine but in the long run it is a weighing machine’.
For Cross, this means, “in the short term, share prices will do what they want to do, but the long-term success and value in a business is about compounding cashflows and return to shareholders”.
“As long as your businesses are doing what you’d expect them to do, and adding and creating value, then, in the end – and this is easier to say when, like me, you’re older in your career with, thankfully, a good performance track record behind you – that gives you confidence to go through the difficult times because you have belief in what you’re doing.
“It’s worth remembering that today’s share price doesn’t necessarily reflect where it will be in five years’ time. But today’s business model will.”
Anthony Cross joined Liontrust in 1997 and launched the Liontrust UK Smaller Companies Fund in 1998. Before moving to Liontrust, he joined Schroder Investment Management as a graduate trainee, later becoming an equity analyst before joining the Smaller Companies team in 1994.
This article first appeared in the February edition of Portfolio Adviser Magazine