Mr Matthews’ experience with the small-cap fund was a “formative” period for his career and the development of his investment process.
“With smaller companies you have very direct access to company management, and these very often are people who have built up their own businesses,” he says.
“Companies that are smaller tend to have greater volatility of earnings, so when things go wrong they don’t have the benefit of diversity to shoulder some of those negative profit shocks.
“You learn pretty quickly some of the banana skins to look out for, so I think that’s a very good, formative place to start your fund management career.”
While he may have learned the ropes on the Jupiter UK Smaller Companies fund, it was on the Growth & Income portfolio that the manager further developed his process and reputation.
From taking sole control of the portfolio in 2006 until leaving Jupiter last year, Mr Matthews grew the portfolio from £40m to more than £400m, posting a return for the entire period of 83.5 per cent. This compared with an IMA UK All Companies sector average return of 40.6 per cent and a FTSE All-Share index return of 46.9 per cent.
Mr Matthews cites one of the attractions of fund management as its “incredible transparency” – something that may come as a surprise to those debating fees and charges.
“It is incredibly transparent as to whether you’re doing well or badly,” he explains. “Some people enjoy being in the spotlight and some people prefer to operate in a more team-based environment. Ultimately your performance as a fund manager is incredibly transparent. When you’re doing well it’s great; when you’re doing badly it’s not so great.”
For Mr Matthews the good periods have outnumbered the bad. While in charge of the Jupiter Growth & Income fund, the portfolio outperformed both its FTSE All-Share benchmark and the IMA UK All Companies sector average in 15 of the 30 quarters from Q3 2006 to Q1 2013. In only seven quarters did the portfolio fail to beat either of these comparators.
The manager has also been very open since taking charge of the Schroder UK Alpha Plus fund in explaining to investors what they can expect. Speaking to Investment Adviser earlier this year, Mr Matthews said he had reshaped the portfolio to place more emphasis on a defensive stance. As well as this, he also directly addressed the question of whether his process could live up to the implied promise of the ‘Alpha Plus’ brand. After all, predecessor Richard Buxton was often candid in admitting his fund’s aggressive style would invariably place him in either the top or bottom quartile in the performance charts.
In spite of the managers’ differing styles, Mr Matthews said earlier this year he was “very comfortable” with the Alpha Plus title, which now applies to five of Schroders’ equity products following the closure of a US fund late last year.
