“We think that culture of individual accountability is essential particularly given our contrarian stance.
“If we tried to run this as a committee then you undermine the whole essence of what it means to be contrarian, you need to be able to have a view that differs from the majority and if you force a majority view then you cut out those contrarian ideas.”
It could, one would imagine, make the meetings every six weeks rather awkward if one manager disagrees with another’s decision to buy a stock?
Preston disagrees.
“We combine all our ideas and the clients get exposure to each of us.
“I might disagree very strongly with one of the shares another manager owns but nine times out of 10 I have to say, ‘I disagree but I trust your decision making’.”
Sometimes they can end up buying the same stock, but this is only a good thing Preston believes.
“It is as it should be because you’re getting a double signal that that stock is attractive, so it’s more likely to be a good one. It works so the best ideas get a greater weighting.”
Ultimately, Preston says the research into each of the stocks and “sticking your neck out” to stand by a contrarian view is what has ensured strong returns for investors.
Being a bit different is also what makes a good active manager at a time passive instruments are making a persuasive argument on the basis of costs, he adds.
“It’s only because of the willingness to be different that we’ve done well, and to be different you’ve got to stick your neck out and you’ve got to have done your homework properly. There’s a difference between the active managers who are genuinely acting in their clients’ interest to do deep level research, to make long-term calls on investments and trying to add value, versus what a lot of so-called active managers have ended up doing as closet index trackers.
“There is where the clients are getting a rough deal and giving active managers a bad name.”
