When Peters first met Yarrow in 2001, he didn’t even know what a fund manager was. He was on the path to becoming a physicist, wrapping up his undergraduate degree from University College London. Yarrow, meanwhile, was just beginning his asset management career at Rathbones.
Shortly before Peters was about to complete his doctorate studies at the University of Oxford, he and Yarrow hatched a plan to launch their own investment vehicle. Peters was to trade in academia for the dog-eat-dog world of London finance, getting several years’ experience under his belt, at which point the pair would come together to launch their first fund. Then the financial crisis happened. Jobs were scarce for newcomers like Peters.
However, in 2009 “the stars aligned”, he says. Yarrow had an opportunity to leave Rathbones and the pair decided now was as good a time as any to bring their experiment to life.
“We had no brand, no track record, I wasn’t a fund manager and Hugh wasn’t a star fund manager. He was known around the City but wasn’t a big name,” Peters recalls.
While it was “pretty slow-going” at first, with the pair running their operation from Yarrow’s dad’s firm Wise Investments, three-and-a-half years in, the Evenlode Income fund received a £120m cash injection from multi-manager team Jupiter Merlin, tripling the size of the fund.
While he might seem out of place in the investment world, given his background, Peters argues there is more crossover between the worlds of physics and investment than you might imagine.
“In physics, you are looking at how the physical world works. With investment, you are looking at how the economic and human world works. Why is a business good? What is it about it that people like?”
Examining the minutiae of listed companies is at the heart of the duo’s investment philosophy. They strategically select companies they can see themselves owning for decades, creating a highly concentrated portfolio of their best ideas.
Labour of love
Like its predecessor, the Evenlode Global Income Fund is a collaborative labour of love, run with the assistance of co-portfolio manager, Chris Elliott, who was brought into the company fold three years ago. Now at close to £70m, the portfolio has 37 holdings, just three shy of the Evenlode Income Fund.
The new fund is decidedly on-brand, applying the same investment strategy of the flagship Evenlode Income Fund on a wider geographical scale. The emphasis remains on finding businesses that can deliver “a decent and growing income stream into the future”, quality companies with intangible assets, hard intellectual property or just “collections of clever people”.
There’s a good chance that the global income vehicle will not be the last fund to come out of the Evenlode stable but “don’t expect us to be launching a South Korea smaller companies fund or anything like that”, says Peters. “We are not looking to be an enormous across-the-water-run fund house with all funds for all men.”
Peters is “not completely green” as a global investor. He and Yarrow have always exploited the 20% of the flagship fund that they can to invest in non-UK securities, predominantly US names such as Microsoft and Johnson & Johnson.
US companies make up 42.5% of the portfolio, followed by Europe at around 33%, the UK at 20% and Canada at a little under 4%.
They haven’t branched out into developing markets yet but are on the hunt for opportunities with the help of corporate governance expert Sawan Kumar, who joined the firm from Schroders last year.
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