But in fact the leader of the Asia Pacific ex Japan equities desk and manager of the Newton Asian Income Fund, a flagship product for the BNY Mellon Asset Management boutique, took an active interest in the stock market at quite a tender age, picking up some British Telecom shares just after the company privatised at the age of 13.
Early interest
“I think my father probably thought it was a good idea to go for it, so on his suggestion, I did. It’s not like there was an age limit; it was back in the days when application forms were just at the back of a newspaper.”
His initial success ignited interest that has yet to wane, and he spent his early days investing in “lots of other shares that became available at IPO during so many government privatisations” and penny shares.
He admits he might have gone into that first purchase “a little bit blind” but he soon swotted up and, his interest piqued, he skived off school to visit the London Stock Exchange on the day of the Big Bang back in 1986.
“I was 15 and I came up to London for the day. I was one of the first people to watch on film how things were going to work from then on, with the deregulation of financial markets. I learned a lot during the crash.”
Landing a chance position as a graduate trainee on the Asian desk at Henderson in 1993, the now-absorbed Pidcock reckons he would have chosen it anyway, but it seems fate dealt him a fitting hand.
“We were seeing extremely strong bull markets for many Asian markets. Hong Kong was up around 100% I think. So the Asian desks asked for the first round of graduates who joined and I happened to be the first one hired.”
He had no links to the region, bar a passing fancy of himself as a Thai boxer at university and a penchant for Asian cuisine.
Pidcock doesn’t feel he misses out by not speaking the local languages, with English still the major language of business.
Cutting his teeth at Henderson, he then moved to BP Investment Management where he flourished with the larger remit.
“I was given a lot more money to manage rather quickly so I could get on and take on a lot of responsibility. I stayed for eight years before I heard about the head of the Asian desk leaving Newton and applied for the job.”
Theme park
Joining Newton in 2004, they launched the fund the following year.
Newton is renowned for being a thematic investment house, which he says rather than dictating his asset allocation decisions, is rather a “sensible way to look at the world”, influencing the dialogue with company management.
He goes on: “If you just focus on the macro numbers, you might spend your whole time trying to accurately forecast a GDP number but it might not help you even if you make that number correctly.
“If you think in a thematic way, you understand the factors that affect businesses, which also affect savings and consumption patterns.”
Working with the team’s analysts, strategists and other fund managers allows Pidcock and his team to build up a picture of the world against which he can then articulate his investment ideas.
“If we feel that certain sectors or countries are likely to be beneficiaries of particular themes then we are more inclined to go looking for particular stocks in those sectors or countries and to make sure they are not negatively affected by other things,” he says.
He gives the example of ‘population dynamics’, which refers to the demographic profile of countries and cities.
“If population growth is strong because mobility is improving and there is free movement of labour, then we can expect consumption growth to be pretty good and would focus on consumer companies.”
The Philippines is cited as “one of the best demographic stories anywhere in the world” and “has been mismanaged for decades” but is now a huge turnaround story.
He explains the country has implemented “enough economic restructuring to mean that a large enough proportion of the working age population can contribute to that economic growth, which is a little bit in contrast to India.”
Pidcock says on paper, the demographics of India have looked “wonderful” but in practice the country has not benefited.
Modi’s new government has given cause to be a bit more optimistic and, as such, he is looking at the consumption-based opportunities in India more closely but he is mindful of market “euphoria” which can give a false impression to investors.
“It’s a few years out, but India could go more the way of the Philippines.”
Caroline Keen is the £4.6bn fund’s alternate manager and Amy Leung supports the pair, with Pidcock eager to stress the team approach.
“I think we complement each other very well. Caroline and I are both generalists, covering all the countries and all the sectors.”
This combined knowledge builds on that of the in-house research team at Newton, which is made up of 19 sector analysts.
The team makes around a dozen trips a year to the region. The meetings range from their time as ‘anchor’ investors during company IPOs when they would prefer to meet on the companies’ home turf to maintaining information flow on companies once they are brought into the portfolio.
Pidcock insists their information flow is “first class”; making as many site visits as possible, constant conference calls and taking full advantage of their position as “one of the biggest investors in Asian markets in terms of orders placed from the UK”, which he says sees him topping the list of people they want to meet when companies come to the UK.
The full spectrum
The diverse range of cultures
across Asia is both a challenge and an opportunity, the manager says. Australia sits at one end – a very Western-style investment environment, a free market, with an independent central bank, generally strong currency and very good corporate governance.
Its attitude towards corporate growth and to shareholders is likened to that of the US.
At the other end of the spectrum is China, which has stringent capital controls on its listed companies, is not yet a democracy, but will
continue to grow relatively quickly
although not as quickly as it has done.
India is very different again, more democratic but with “stodgy” bureaucracy laws making it a very hostile environment for investors – another opportunity for Modi to impress his voters by relaxing the market.
South Korea is much more like Japan with a low birth rate, rapidly aging population, no immigration and a socialist, almost nationalistic political bias.
Of greater importance to a fund manager though, is the country’s strong cultural aversion to paying dividends, which explains in part his underweight to the region.
“It’s partly because South Korea has a low payout ratio and partly because we don’t find that any companies which are that inspiring, so we would probably be underweight even if not for the yield.”
The assortment of currencies is another regional factor, but Pidcock refuses to hedge, setting him apart from many of his peers.
“If I have a very strong opinion on a currency we will take that into account when taking a decision on the equity. If it’s weak, we will focus on the exporters, for example.
“There is a cost of hedging, I think it can be a distraction and it takes up extra time. You also face the very real risk of getting it wrong.
“When my investors put a pound in, they know that is a pound leaving sterling but at least they know where they stand.”
