As well as Japan and certain aspects of Europe, JH&P likes technology in the US but has some concerns about the dollar. Another challenge from across the pond comes in the shape of president Trump, to whom, Horniman says, some clients have not taken a shine.
“We have learned some clients don’t like Donald Trump and some are very angry about what has happened over there. What I do know is the environment he has set up for the banking industry is very good and, in terms of performance, it has been a very good time for investment banks.”
Competitive advantage
When searching for companies for the portfolio, JH&P prefers those with proven business models or “moats”, or a competitive advantage that protects what they do.
“The last thing we want a private client to have is a shock, so we do a lot of work on making sure companies are very high quality,” he says. “You outperform by choosing good companies but also by avoiding bad ones. This is half the skill of a fund manager.”
The group is cognisant that some asset classes look unattractive, namely cash and fixed interest. Of the latter, Horniman says “that lemon has been squeezed for the past 18 months” and issues over liquidity have increased its correlation with equities.
“As we have seen interest rate expectations start to rise, fixed interest looks like the wrong place to be for sterling investors. That said, index-linked is providing a degree of security because of inflation expectations; but let’s not get too carried away about where inflation and interest rates are going.”
To avoid correlation, JH&P is also looking at hedge funds of funds, commodity funds and gold as a hedge against markets, as well as property and infrastructure.
In terms of company culture, Horniman believes it is important to nurture young talent, saying that everyone in the company needs to know how important they are and to have a voice, not just the partners.
“If you look at our people on our website, you will see a picture of Ashley who showed you in. She’s so important to the business, she is our office manager and says it is fantastic to be the face of our online presence.”
This attitude stems from Horniman’s early career when he fondly recalls starting on the graduate scheme at merchant bank Morgan Grenfell, working with Nicola Horlick.
He says: “On the first Monday morning meeting that all the graduates attended, she said, ‘James, what did you think of the Sunday papers?’. I had been in the pub all day. It taught me that graduates have a voice; and to read the papers on a Sunday.”
Since then, needless to say, Horniman has always read the Sunday papers.
