The 250m cycle rider: Funds maestro with patience
touts small-caps as 'best-ever investment'
19 August 2003
"This is an unusual cycle," says Peter Webb, manager of award- winning Eaglet Investment Trust and chief executive of Unicorn Asset Management. "We wouldn't normally have expected to buy good-quality cyclicals so cheaply, even though they're unprofitable today.
Most other fund managers refuse to believe that the cycle exists any more: they believe that consumers can go on spending indefinitely."
Webb speed-talks with evangelical zeal. If he has a mantra, it is "understand the cycle". For that reason, he believes that the small- caps market today represents "undoubtedly the greatest opportunity of all time".
You might be forgiven for thinking that you've heard such a brazenly optimistic pitch before but Webb is no snake-oil salesman pushing the latest fashionable investment sector. It is more that he is a critic of the blinkered approach of City institutions.
"For fund managers to stand against the herd isn't in the interest of the big integrated houses which control the bulk of the funds," he says. "The small-caps market hasn't escaped the trend towards indexation and size, which is excluding many more companies from the radar of the institutions. But that exodus of the big institutions from the increasingly large small-caps market has created an extraordinary opportunity."
Webb started in the City in 1979 at Lloyds Bank. In the mid- Eighties, he went to work for the Thornton Group and in early 1987 he was taken on as a trainee by a UK fund management business that Thornton acquired from Hoare Govett.
He says the most important lesson he learned was the need to meet the managers of all the companies his fund was investing in and to get to know a few industries in depth. "Through the recession, I was out there two or three days a week, visiting businesses all around the country," he says. "I got a good reputation among industrialists because very few institutions were prepared to do that."
Webb decided to break away from Thornton in 1992 when he met Peter Underhill of Capital Industries.
Together they created Capital Webb Asset Management. Webb put every penny he had into CW Asset Management in return for a 25% stake. Some of his initial purchases are still held by Eaglet.
One of them, Ferraris Group, is showing a 100% gain despite stock market falls.
He says: "A lot of fund managers struggle to perform because they deal so often.
I'm a very patient investor. If you can buy a stake in a very good business for substantially less than it's worth, and you're patient, and you work together with the management, you'll unlock the value."
Webb, who was 32 when he set up CW Asset Management, aimed to be a millionaire by 40. Three years ago, just before his 40th birthday, he formed Unicorn and issued 49% of its stock to new investors to negotiate his way out of a partnership. (After CW Asset Management, he was partnered first with the Rutherford Group and then with Granville, an independent bank.) Thus he took control of his own business for the first time, obtaining the transfer of all funds under his control with the consent of their boards and shareholders.
Unicorn-has a cross-section of supporters in the City, but particularly in industry.
"This time last cycle [in 1993], I had 21 million under management and one fund," Webb explains.
"Now I have 250 million and eight funds. In 1993-94 we made 50,000 profit. We made just under 1 million last year. Very few funds do what Eaglet does, not only for our investors but for the companies in which we invest. We're holding companies for five years or more - that's not an untypical period - and we aim to buy at the low points in cycles. Eaglet is contrarian but because of its sheer scale it has to move a little bit earlier in cycles and take a little pain in order to be around for the gain."
Eaglet is already perceived as a catalyst for change and progress, and Webb believes that this impression will deepen over the next decade as the fund becomes more significant to a greater number of companies. "Eaglet is a fund for the cycle," he insists, "not for the moment."
Webb, whose father worked for a bookie and as a window cleaner, was born in Surrey. His family later moved to Brighton and then to Essex, where he still lives today.
He has a second home near Brighton and a trust fund for his three children, who attend a local school.
Recreation comes in the form of horse racing. Since the launch of Unicorn, he has "done Cheltenham" for the past few years, and he is also a racehorse owner.
"My first season I had eight winners out of 22 runners," he says. "Last year I had a small number of runners but three or four winners, and I turned down a very big offer from the Arabs for one of my horses, Striking Ambition, which ran in the French 2000 Guineas. This year I own more horses than I did in the previous two years."