Steer congratulates Buxton on Autonomy

Schroders' Richard Buxton has revealed he was congratulated by Artemis' Tim Steer for holding tech firm Autonomy as it received a bid approach - a time when Steer was shorting the stock.

Buxton said although performance on his £2.8bn UK Alpha Plus fund was impacted by exposure to financials and cyclicals over the past few months, Hewlett Packard's bid for Autonomy in mid-August offset some of the losses.

The US technology giant offered to pay a premium of about 75% for the firm in a £7.1bn offer valuing shares at £25.50 each. On 19 August, when the bid approach came to light, the tech group saw its shares jump 77%.

Buxton told clients: "We received an email from a unitholder as I badgered on about this persistently and did not allow myself to get a twitch from Tim Steer's views. The unitholder said ‘well done, you stuck with it and were proved right'.

"In all fairness to Tim, he did send a message to say ‘well done, you were right and I was wrong, but actually I am not really wrong as I am shorting the HP stock'".

Steer was short Autonomy in his £320m Artemis UK Growth fund and blamed this single position for the fund falling 9.7% in August. 

At the time of the bid Steer described HP's offer as "gobsmacking" and his August factsheet said: "The fund was looking good for the month in very difficult markets until the extraordinary bid for Autonomy came from HP at an astounding 33x 2011 earnings and 10x sales.

"We were short for a host of reasons and that position had worked relatively well until the bid. The vast majority of the fall in the value of the fund in August was due to this single position. We have had a good record in the past at identifying stocks to short, based on accounting analysis. But we got this one wrong."

Yesterday Buxton said he had been "gently" reducing Autonomy holdings to add to "extraordinarily hard hit positions" such as RBS, Lloyds, L&G, Taylor Wimpey, Debenhams and Xstrata.

"These are stocks I favour over the long term which have been hit very hard in the past two to three months."

Buxton admitted his performance over the three-month period had not been satisfactory but was "well within the historical range of performance outcome - you do not get to make persistent excess returns without a degree of volatility".

Morningstar figures show the fund has lost 10.6% over the three months to 2 September but remains top quartile over three years, with a positive return of 13.1%.