Over the years, football-mad
Andy Brough has produced
a performance worthy of
the Premiership with his
Schroders UK Mid 250 fund.
When Schroders' Andy Brough outlines his "foolproof economic theory", it is highly unlikely to result in a mad rush to rewrite the history books.
Far from challenging the ideas of John Maynard Keynes or Milton Friedman, Brough's way of evaluating the economy is as simple as taking a glimpse at his weekend football team.
"I have a pretty dependable theory. It comes from taking a look at the very complicated spreadsheet which lists the fee schedule for the members of the Alexandra Park 7th XI on a Saturday afternoon," Brough explains.
"As the captain of the team, I have a list of players who owe money and I know what jobs they have. So I have got a very good feeling for what is doing well and what is doing badly. I am very lucky; no one else has got this."
This is Andy Brough. While half-jokingly describing himself as a "caring capitalist", Brough is not the stereotypical manager - as any reader of his Mail on Sunday's 'Ask Andy' column would attest.
While he is no stranger to colourful one liners and anecdotes, Brough's strong track record speaks for itself.
His £1.7bn Schroder UK Mid 250 fund, which last week marked its 10-year anniversary, has been the fifth best performing fund in the UK All Companies sector since its inception.
Even so, Brough accepts it has been a challenging decade for investors, with a strong bull run interrupted by events such as the dotcom crash and credit crisis. While the manager admits his process has not altered over this period, he has seen his investment universe change shape on many occasions.
"The stocks in the index have varied dramatically. If you think back to when we launched the fund in November 1999, there are now probably only around 75 of the original 250 stocks left in the index," Brough says.
"We have had lots of stocks during that time that have gone in, come out and gone in again. There have been a huge number of takeovers, newcomers being floated on the market, stocks coming up from the small-cap index, so you have had a group of companies that is forever changing.
"One of the great attractions of the mid-cap index is it is forever changing and that is why we call it the Heineken index, because it gets refreshed like no other."
Brough's Schroder UK Mid 250 fund has climbed 137% since its inception, against just a 27% rise for the sector.
While the manager's ability to add value over the long term is proven, there is no doubt the past 12 months has been the most difficult period of his tenure.
"Over the past year, it has not mattered if you have the best stock in the sector, you have still been whacked," Brough says.
"So avoiding Punch and Enterprise, you still got whacked via holding Wetherspoon. You hold Bellway and avoid Taylor Woodrow and Barratt, but you still get whacked.
"I have never known a time whereby sector calls are so much more important than stock calls. But a lot of these stocks have come back quite significantly."
Brough's fund, like many in the mid-cap space, suffered a sharp fall during the market downturn, but has bounced back sharply since the market low.
"This is where I get a buzz from being a fund manager. Hearing everyone write you off after 2008, saying things such as 'Andy Brough, loser'," he says. "And then 'oh my God, in 2009 he is alright, maybe he was correct'.
"I do take it personally, I hate losing. You always want to do your best for people. The thing is the market is always irrational, you just hope it is less irrational on the stocks you own.
"Another of the things I really enjoy is seeing one of my stocks get promoted to the FTSE 100. The best way of describing it is like being a West Brom fan - all your performance comes in the Championship. When you get to the Premiership, you cannot hack it. For example, all the money in Balfour Beatty was made when it was in the mid-cap index."
While faced with continued economic uncertainty, Brough still expects his stocks to perform well in the near term.
"It is true a lot of the easy money has been made. But people are currently thinking, 'Christ, I have missed the rally, I have to get in'. I do see strong upside and see plenty of opportunities to buy," he says.
"There has been so much said about the UK consumer, but the UK consumer has never been better off. Disposable income from 2008 to 2009 is up 20%. Okay, headwinds are appearing now, but the consumer has survived intact for a lot longer than people think. I think they will go on for another six months.
"However, I think there is too much cash around. My big worry is inflation next year. I think rates will go up sooner than people think."
While there is an overwhelming belief Government spending must be cut to reduce the UK's debt burden, Brough is not convinced.
"What you have to remember is there are lies, damn lies and government statistics. Public spending has not been cut for 32 years," he says.
"Everyone thinks Margaret Thatcher cut public spending. I am a Thatcher's child, I am not saying my dad was a roofer, but I was there when she was in power and people were very militant. Right now it is a similar situation. Basically the UK needs to cut public spending by about £60bn, which is never going to happen."
A key element of Brough's 2009 has been in refinancing opportunities. Over the course of the year, the manager has seen numerous companies come to the table looking for capital, a situation he openly confesses to relish.
"I still think it is going to be a big growth area. It is still quite a struggle to buy shares; but there are some big gains in the things we have refinanced. It is easy money to be made," he says.
"Some days I can meet a number of companies back to back. I like to joke we have our lucky deal coin, yes or no. Sometimes it just lands on the edge so we sit on the fence."
After a decade in charge of the fund, can Brough see himself in charge of the fund in another 10 years time?
"I have still got to work, so yes, that is definitely possible," he says. "Obviously every time I go skiing, I think being a ski instructor would be a slightly more pleasurable job. At least in that job when you are going down, no one blames you, do they?"
