Not an April Fool in sight
On 1st April 2014, Cave & Sons were pleased to welcome both clients and professional associates to join us at our Northampton head-office for an evening hosted by our Chief Executive Officer, Andrew Cockerill, who was joined by regional Bank of England representative, Pamela Wright, and fund manager from Schroders, Nick Kirrage.
After the exchanging of pleasantries and filling of wine glasses, it was Pamela who got the proceedings underway as she spoke about the Bank of England’s view on the UK economy. The focus of her presentation was three fold; where the economy is now, where it is heading, and the Bank’s Monetary Policy Committee’s response.
Pamela used a number of economic indicators to support the Bank’s healthier economic diagnosis; GDP increasing, unemployment decreasing, equities prices across the globe  recovering, and house prices on the rise, were just some of the metrics used to illustrate the improvements in our macroeconomic backdrop.  On the Bank’s projections, it became apparent that Pamela felt that although we may have seen the worst of it, we have not yet made a full recovery, particularly as levels of investment and earnings growth remain somewhat subdued. Despite this, she said the Bank still expects the economy to grow at a rate of 3% per annum and CPI inflation to continue to hover around the targeted 2%.
As the presentation neared its end, the focus shifted onto how the MPC plans to manage the recovery. Pamela was keen to highlight that Mr Carney’s ‘forward guidance’, despite much criticism after abandoning its initial guidelines, remained on course. She admitted the revisions were a result of unemployment falling far quicker than the Bank had expected. She is keen to stress her view that when an interest rate decision is made, it will be a gradual move, and a return to the pre-recession rates did not seem probable for the foreseeable future.
Nick Kirrage, who co-manages a number of Schroder funds including their Income and Recovery Funds, was next on stage. He had tailored his presentation to income investing and the importance of challenging the market consensus and began by highlighting the common mistakes made by investors over the centuries, and the lessons that were to be gleaned from these. One simple point he was keen to stress, and clearly struck a chord with many in the room, was the difference between a ‘good company’ and a ‘good investment’, emphasising the price paid for an investment is the biggest driver as to how profitable it becomes. In turn, he explained why he is not afraid to adopt a contrarian approach in search of value, frequently favouring companies currently unloved by the market.
Nick went on to state that ‘bucking the trend’ is not always rewarding in the short-term, touching upon how ‘averaging down’ should be a fundamental discipline to any investment strategy with conviction. However, as volatility typically reduces over time, value investing offers opportunity for strong capital appreciation for long-term investors in his view. Interestingly, it was out-of-favour supermarket WM Morrison, he offered as possible ‘value’ opportunity, mentioning it was a company he and his team are currently paying close attention to.
After running through a breakdown of the Schroder Income Fund, Nick was able to justify his value approach with reference to the Fund’s strong performance track record. The presentation was followed by a number of the audience questions as attendee’s showed themselves keen to tap into his expertise.
After Andrew brought the presentations to a close, attendees had their chance to discuss the presentations with the Cave’s representatives at the seminar over a light buffet.
Feedback showed that the evening was an unquestionable success and Cave’s would like to thank both main speakers and all that came along.
Cave & Sons
April 2014
