In a wide-ranging interview, CEO Rob Harris discusses Majedie’s approach to navigating the lockdown and considers the sorts of changes our industry might experience as a result of Covid-19.
Reading time: 15 minutes.
This article was featured in our Summer Journal.
How has Majedie coped with remote working?
Majedie has operated in the cloud since launch in 2002, and Tim Crunden (IT Director) and his team have done a great job over the last few years to build agility, resilience and compliance into our remote working capabilities. So it was straightforward for us to respond instantly to the government’s request on 16 March that anyone who could work from home, should; our Coronavirus Committee had been planning for such an event from late January. Since then the whole firm has worked extremely hard to ensure that we continue to do our best for our clients, and each other, in these unusual times.
What have been the main business challenges that Majedie has faced?
Performance is always uppermost in our minds; it’s what still keeps me awake at night. As a boutique, we’ve been able to adapt quickly to a distanced working environment; for example, our investors have daily video calls to discuss news and views – ensuring that debate and challenge, which is such an important part of our investment process, continues to flourish. Otherwise, the most obvious challenge has been our inability to meet in person with existing and prospective clients. Skype, Teams and Zoom are invaluable communication tools, but they don’t fully replicate the nuances or possibilities of a face-to-face meeting. But rather than turn inwards on our own business issues, our strong balance sheet at least means we have been able to look outwards and forwards.
With performance in mind, how are you feeling about 2020?
Markets have been on a rollercoaster but looking at performance to the end of May I’m pleased with where we are. The UK Equity Fund is ahead of benchmark, our UK Focus Fund managers have teamed up very successfully, while our UK Smaller Companies portfolios have a real spring in their step under John King and Emily Barnard. The newest kid on our block, Tom Record’s International Equity Fund, is adding to the outstanding near 6-year track record of its equivalent unconstrained strategy, which has beaten its MSCI ACWI ex USA benchmark by 7.6% p.a. since inception (GBP, net of fees). Our Global and US equity funds are all well ahead of benchmark year to date, while Tortoise has leaned decisively into the broader market recovery. Dividend cuts have made it tougher going in the UK equity income sector, but Majedie is fortunate to have a crack team with a distinctive approach.
How have your colleagues found the new working environment?
In early May we conducted an employee survey which touched on topics from mental health and wellbeing, to productivity and efficiency, through to possible future working patterns. Engagement was very high, providing us with real insights and useful pointers to inform our decision-making process over the weeks ahead. Individual responses of course reflect personal circumstances, which have been more testing for some than others. That said, 98% of Majedie staff rated the company as well prepared for remote working and 93% said their experience of prolonged working from home has either been good (35%) or very good (58%). All have found our remote working software and communication tools to be effective (10%) or very effective (90%).
You mentioned mental health. Has anything concerned you?
Prolonged remote working is not for everyone, so line managers have been asked to check in regularly with their teams, offering buddies where needed and actively encouraging a healthy work/life balance; in our survey everyone said they are working the same or more hours than in the office, and several have found it hard to draw a clear distinction between work and home life. We’re certainly not complacent (a recent initiative is to introduce a virtual ‘summer kitchen social’ on Teams) and we have all been reminded of the confidential support that is available, such as Lifeworks and Wellbeing in the Workplace. Encouragingly 97% of colleagues say they have felt sufficiently (22%) or well (75%) supported by the company from a mental health perspective during this period.
When do you expect to return to the office?
Our current plan is for a return to 10 Old Bailey in early September, accepting of course that events may get in the way. We and our building managers are considering government advice for businesses as it evolves and over the summer will conduct a full risk assessment to determine our own office set-up and the wider practicalities involved, in particular for vulnerable groups; for our working parents it will hopefully coincide with a full-time return to school. We are also looking at ongoing flexible working patterns: 85% of Majedie staff say they could maintain effectiveness at expected levels whilst working from home on one (30%) or more than one (55%) day per week. In whatever shape we do come back, we want to come back better.
Has this period changed your views of effective leadership?
Leadership certainly feels very different from where I’m sitting now: ‘management by walking around’ is on hold – other than for teenagers and dogs, that is. Team leaders are acutely aware of their role in providing motivation, direction and purpose, particularly for those who have found remote working more difficult. Internal comms is obviously important too: we have sent a ‘WFH Weekly’ email since early April, which aims to stimulate the openness and collaboration that is less tangible when we’re not all sharing one room. Majedie has a strong boutique culture forged by widespread equity ownership, so whilst always retaining a healthy paranoia, I worry less about issues such as misconduct and personal accountability.
Do you think the UK asset management industry has successfully stepped up to the plate?
The industry has certainly stepped up in its primary role, which is to provide a means for capital to be allocated towards those companies and sectors, often local in nature, which need and deserve financial support to grow and prosper. The £8bn in equity capital raised by UK-listed companies in recent months is critical to supporting sustainable economic growth and thereby society in general. It has also been heartening to see the industry understand its wider responsibilities to the societies in which we all live and work: to see responsible capitalism in practice. As a firm we have made substantial charitable donations to NHS Charities Together and the National Emergencies Trust, and I know that many of us have personally contributed significant sums to local causes too. Meanwhile a number of firms, Majedie included, have accelerated payments to underutilised suppliers throughout the lockdown period: cleaners, laundry providers, even office florists.
I do wonder whether rising government debt burdens and increasing nationalism will move less responsible firms into policymakers’ sights: those that may have egregiously accessed government support schemes, or perhaps moved offshore to escape paying corporation tax on local revenues. As a UK-domiciled, employee-owned, limited company, we estimate that since launch Majedie has generated UK tax receipts equivalent to the annual starting salary of 20,000 new NHS nurses.
What else would you like to see happen?
As the crisis has unfolded, it was jarring to observe global equity markets bounce back so strongly in the face of escalating socioeconomic tensions. The market recovery has not been surprising in itself, given the extent of global central bank and government support, a synchronised easing of lockdown restrictions, and the somewhat disconcerting evidence from personal account openings and investor positioning of resurgent animal spirits. But such optimism sits a little uneasily with the debt-resolution measures that governments will need to put in place and the longstanding inequalities reinforced by this crisis. For all the well-intended initiatives around social mobility, diversity and inclusion, our industry is not alone in needing now to step up and walk the talk.
We are all learning from Black Lives Matter: Majedie is proportionately a little more ethnically diverse than the wider UK population, but over the years we have struggled to attract enough applications from women and minority groups, in particular for senior Investment team roles. We know we can do better – and are committed to improving our outreach and recruitment processes to attract more diverse applications. We’re planning to partner with the Social Mobility Foundation, to provide a series of skills sessions for Year 13 students from underprivileged backgrounds, and to deepen our relationship with Investment20/20. We were pleased that the Investment Association showcased our ‘Next Generation Investor’ competition for undergraduate women in their recent publication ‘Addressing the Gender Pay Gap: Industry Initiatives’.
What does the UK asset management industry look like post Covid-19?
Our industry is important to the UK economy, not least in providing 40,000 jobs and £5bn in tax revenues, so it has been encouraging to hear the UK government using such a constructive tone throughout its discussions with the EU. From a micro perspective, as in other industries it feels as if some pre-existing trends will accelerate post lockdown, in turn providing opportunities to truly committed firms. Consolidation will continue, with mid-tier firms forced by ongoing fee pressure to justify their existence. Clients will rightly focus more on balance sheet resilience. New boutiques will sadly find it harder to get off the ground, given higher hurdles for seed and regulatory capital requirements. Meanwhile the largest firms will attract greater systemic scrutiny, particularly where portfolio risk platforms are shared. All that said, high quality active managers have an exciting future: where multiple expansion and beta was the key driver of returns for investors during the last cycle, supporting the trend towards passive investing, pressure on corporate margins and limited valuation expansion over the next cycle may mean lower overall returns but greater opportunities for fundamental alpha relative to beta. Meanwhile I am hopeful that the responsible capitalism flame burns brightly – the UK should have a leading role in sustainable investment.
What’s the most important message to your clients?
Our message is simple: we are absolutely committed to our active equity specialism and to making money for you, responsibly.
UK equities have faced well-known headwinds in recent years and so the Edinburgh Investment Trust mandate win was a huge vote of confidence in our capabilities, both from its Board and from the renowned global consulting firm that compiled the shortlist. The lockdown period has inevitably made it more difficult to market our Global and US funds internationally, but we’ve always believed that good performance eventually turns heads. And in Responsible Capitalism, we’re confident that our integrated, evidence-based approach will enhance returns in our existing funds whilst supporting, in time, the launch of a distinctive new offering in the sustainable equity space.