Top -performer Slater on coping in a low growth environment

What do you do when you are a growth fund manager trying to generate strong returns in a low growth environment? Katrina Lloyd spoke to top performing fund manager Mark Slater, a Professional Adviser Awards 2011 winner, to find out how his Growth and Recovery funds are bearing up.

Q. Have you made any changes to your investment process in the aftermath of the 2008 financial crisis?
In terms of the crisis, we have not changed much but one thing we have done is sharpened up our focus on avoiding problems. Most companies do not have much debt but we are wary of debt. The big thing for us is that trading has to be good for a company right now and there has to be a very clear outlook, ideally multi-year, as well as a tailwind.

The fund is more evenly spread now across the market cap spectrum. A couple of years ago, the small and mid cap space was a wasteland after the financial crisis. It is less ridiculous now but the market hasn’t focused on quality. For us it is about quality and price. Quality is very important as the world is so tough but if the price is too high then the risk is probably too high too so we need both of those in place.

Q. How do you avoid problems?
For the vast majority of companies there is some cloud on the horizon but we want companies where everything is working now and there is some additional momentum. Our businesses are often very niche, they can be global, but they are in a fast growing market with an identifiable reason why they should grow for some time and their recent statement will have been very positive. We are looking for high growth with very little doubt about their prospects, although of course doubt is everywhere at the moment.

As an example, we can look at Andor Technology which is in our top ten holdings list. There are no problems on the balance sheet and we bought it at 10/11/12 x earnings multiples which have now risen but earnings growth is up 33% which is very rapid.

They are a market leader but also a technology leader. It is branching out into areas of research which are attracting money. In the UK, research funding is under pressure but in other parts of the world, like Asia, it is booming particularly in areas like nanotechnology.

Oxford Instruments is another company we hold which is a fantastic brand. It also operates in very hot areas of research where there is a huge amount of money available so we are in good niches there.