High Five

12th Oct 2022

Paul Marriage reflects on 5 years of Tellworth Investments, and the trials and tribulations of UK small cap investing in this month’s Insight.

Tellworth turned 5 last month, so I thought it might be a good time to reflect on our journey from maternity ward to reception class. In a nod to the geography of our move and the fact we were only continuing to manage long/short money, John hired an S-class Uber (remember them?) for the exit from Gresham St. Walking out through the ‘big office’ turnstiles I recall thinking that a cloak of corporate protection had been removed from me, possibly forever. The gestation period had all been legals, PR and generally trying to keep the plan on track, but when we left, it felt real and quite scary for the first time. No longer could I disappear into the bowels of a big and successful fund management house and find myself a useful role into retirement if / when I was finally found out as incompetent in the day job – an inevitability at some stage.

In our 60 months to date, we think that UK small cap, our founding DNA for want of anything more sophisticated, has been in favour for about 8 months from November 2020 to May 2021. Euphemisms such as unhelpful background and geo-political headwinds abound but the reality of small-cap investing is that it is really not that easy even when the going is good, that’s why we exist. On our very first day, we found out that our operating system could not cope with the fact that we didn’t complete every ticket in full every day. Oh, the unimaginable joys of being able to actually do what you want when you want in a small-cap portfolio. The return to the West End for me was nostalgic, having worked at T.M. Lewin’s shirt shop on the ground floor of Eagle House and Clerical Medical on St James’s Square in the late 1990s. The former is now online-only, and the shirts have long since stopped being made in Southend, while the latter morphed into Insight and their splendid townhouse office was converted into a private home – whose owner is probably no longer allowed to enter the country.

The interminable Brexit negotiations dominated much of the sentiment towards UK equities in the late teens. One of the little reported common themes was that PLCs worked it out quickly and didn’t moan about it much at all – but that didn’t stop the UK being seen as a go-from asset class. The outlook did seem to improve markedly after the final deal was done and a new government with a big majority was elected at the end of 2019. We really enjoyed the next 27 days or so until someone flew back from a ski holiday in Italy feeling more peeky than one might have expected after a week of chianti, pasta, meat, cheese and solar radiation. The panic sell in mid-March was novel in that the small-cap market did briefly fail in a way it did not in 2008, but a couple of months later equity bases were being rebuilt with 10% placings spreading like their own pandemic. We were not natural home workers, though the technology surprisingly worked.

I did finally feel guilty about the number of times the BennBridge COO had harassed me fruitlessly about trying systems out from home for a day in 2018 just in case. Like most people, I thought WFH was for serial shirkers. On returning to the office that summer the serenity was blissful but witnessing the economic and social damage of restrictions was unstintingly depressing. Among genuine key workers, I was happy with the assumption of train staff that I was probably up to important secret squirrel stuff on my daily slog to SW1.

With fixed balance sheets and depressed share prices surely this was a fabulous opportunity in UK equities and who better than the crack team at Tellworth to execute on it? The narrative was sound, the timing was immaculate, the board experienced and the Ads in the Spectator looked sleek – but the Tellworth British Recovery and Growth Trust Plc never made it off the slipway. In post-match parlance, we were not robbed, but gutted and the positives we took were that at least we had highlighted an opportunity to make money in UK equities that our extant funds duly took. This was that golden era, if 190 days can be classified as such, of stocks going up, IPOs going to big premiums and earnings being consistently beaten. Soggy, greasy, luke-warm, over-salted, undercooked chips are bad; but as we found out in early summer last year no chips are a Toto Nsiala (the former Ipswich Town centre back fondly and unfairly known as ‘total disaster’). No semis would leave the UK housing stock bereft, but it was the lack of these silicon components that triggered the supply chain crunch last summer. We had a brief interlude, maybe 20 days, before Russia invaded Ukraine when we thought maybe things were transitory and perhaps companies were managing OK. Now even my young adult children talk about being conscripted in a land war, unlikely given if it gets that bad it will be short and hot, but that is how much perceptions have changed.

Do I sometimes think why on earth did we do this? Yes, of course, but only ever fleetingly on a particularly grey Monday. Against the odds, we have ended up with a surprisingly diverse £1bn AUM business (there is no longer any point in using US$ for bigging up reasons). Our long-short strategies have consistently made people money, our long-only funds have shared the same stretcher-bearers as everyone else but have never been far from the front line. We have built a unique data set on the UK economy and a bunch of clever people who largely seem to enjoy turning up and trying harder most days. It’s de rigueur at this stage to make some grumpy comments about being on the cusp of a global recession; bring it on frankly. While I will never forget that CIO explaining the last in, first out accounting principle when he sacked me back in 1997, maybe this time it will be FIFO for the UK – the first bit feels priced in at the very least.

While I’m not sure we have won anything much in the last 5 years, like any acceptance speech I must thank all of you who have bravely entrusted your own and your clients’ assets with us. For us, every £ counts.

The views and opinions contained herein are those of Paul Marriage. They do not necessarily represent views expressed or reflected in other BennBridge investment communications or strategies and are subject to change.

Past performance is not indicative of future results.

This document may not be used for purposes other than those for which it is intended, nor may it be reproduced, distributed or transmitted in whole or in part to third parties without the prior written consent of Tellworth Investments LLP. This document has been produced for information purposes only.

BennBridge and Tellworth decline all responsibility in the event of a decision whether or not made on the basis of the information contained in this document or in the event of any use whatsoever of said information which may be made by a third party.

Tellworth is a UK and European equity investment management boutique which launched in partnership with BennBridge Ltd.

BennBridge is authorised and regulated by the UK Financial Conduct Authority (FRN: 769109) with registered address: C/O Windsor House 5 Station Court, Station Road, Great Shelford, Cambridge, England, CB22 5NE.

More posts

Terms & Conditions of Use

To access all areas of this website please read the Terms & Conditions set out below and then click ‘Agree’.

This website is suitable for investment professionals only and not for retail investors.

1. Important Information

Tellworth Investments LLP (“Tellworth”) is a limited liability company registered in England with registered number OC417414. The registered office is Windsor House, Station Court, Station Road, Great Shelford, Cambridge CB22 5NE. Tellworth is authorised and regulated by the Financial Conduct Authority (FRN: 952383). Tellworth is the UK regulated entity and the appointed investment manager to the Funds referred to throughout this website.

Any projections, market outlooks or estimates contained in this website constitute forward looking statements, and are based on certain assumptions and subject to certain known and unknown risks. Accordingly, such forward looking statements should not be relied upon as being indicative of future performance or events.

Past performance is not indicative of future results. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.

In the United Kingdom this website is only available to professional investors meeting the criteria for professional clients set out in COBS 3.5 of the Conduct of Business Sourcebook in the Financial Conduct Authority’s Handbook of rules and guidance, including ‘investment professionals’ within the meaning of Article 19(5) of the Financial Services and Markets Act (Financial Promotion) Order 2005 or Article 14(5) of the Investment Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001.

This website is being provided by Tellworth for informational purposes only and should not be construed as investment advice. It is not a recommendation of, or an offer to sell or solicitation of an offer to buy, any particular security, strategy or investment product.

2. Risk Factors

The counterparty to a derivative or other contractual agreement or synthetic financial product could become unable to honour its commitments to the fund, potentially creating a partial or total loss for the fund. The fund can be exposed to different currencies. Changes in foreign exchange rates could create losses. A derivative may not perform as expected, and may create losses greater than the cost of the derivative. If a fund uses derivatives for leverage, it makes it more sensitive to certain market or interest rate movements and may cause above-average volatility and risk of loss.

Equity prices fluctuate daily, based on many factors including general, economic, industry or company news. In difficult market conditions, the fund may not be able to sell a security for full value or at all. This could affect performance and could cause the fund to defer or suspend redemptions of its shares. The fund may take positions that seek to profit if the price of a security falls. A large rise in price of the security may cause large losses. Failures at service providers could lead to disruptions of fund operations or losses.

3. Not for US Persons

The provision of the information in this web site does not constitute an offer of securities to any person in the United States or to any U.S. Person as defined under the Securities Act of 1933, as amended. The information contained in this site about Tellworth is not directed to any person in the United States. Funds referred to herein are neither registered under the Securities Act 1933 of the USA, nor are they registered under the Investment Company Act of 1940. Consequently, they cannot be offered for sale or be sold in the USA, its territories, possessions or protectorates under its jurisdiction, nor to nationals, citizens or residents in any of those areas.

No investments or services mentioned on this website are directed at US Persons who are not Professional Clients or Eligible Counterparties as defined by the UK Financial Conduct Authority (FCA) Handbook or Qualified Purchasers as defined under the Investment Company Act of 1940. The information contained herein does not constitute a distribution, an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction in which such distribution or offer is not authorised.

4. Your use of our site

When using our site, you must comply with all applicable local, national and international laws and regulations, including those related to data privacy, international communications and exportation of technical or personal data. It may be illegal to download the information contained on our site in certain countries and we and our affiliated companies disclaim all responsibility if you download any information from our site in breach of any law or regulation of the country in which you reside.

5. Liability for use of our site

Access to our site is permitted on a temporary basis and we reserve the right to withdraw or amend the service we provide on our site without notice. We do not accept any liability if for any reason our site is unavailable at any time or for any period.

The information and any opinions contained on the site are subject to change, are for background purposes only and are not to be relied upon as advice or interpreted as a recommendation. The information and opinions contained in our site have been compiled, or arrived at, by us from sources believed by us to be reliable as at the date of publication. However, we, our affiliated companies and other third parties connected to us do not accept any responsibility for any reliance which is placed by any visitor to our site, or by anyone who may be informed of any of its contents, on any information or opinions which are expressed herein and, to the extent permitted by law, expressly exclude all conditions, warranties, representations, undertakings and other terms which might otherwise be implied by statute, common law or in equity.

The internet is not a completely reliable transmission medium and neither we nor any of our affiliated companies accept any liability for any data transmission errors such as data loss or damage or alteration of any kind or for the security or confidentiality of information transmitted across the internet to or from us or any of our affiliated companies. Any such transmission of information is entirely at your own risk. This does not exclude or restrict any duty or liability that we have to our customers under the regulatory system in the United Kingdom.

Should you leave our site via a link contained within our site and view content that is not provided by us, you do so at your own risk. We provide links only as a convenience and without liability. In particular, and without limitation, you understand and agree that the ability to link to another web site and the fact that a link exists does not mean that we endorse or guarantee such site, the site sponsor or the site contents. The content which you access via such links will not have been developed, checked for accuracy, or otherwise reviewed by us. We make no guarantees or representations as to, and shall have no liability for, any electronic content delivered by any third party, including, without limitation, the accuracy, subject matter, quality, sequence or timeliness of any electronic content. Your reliance on any information contained on any site reached through a link shall be your own responsibility. When you leave our site, unless otherwise indicated, you will be subject to the terms of use and privacy policies of the new web site which you are visiting. If you reached our site via a link, please be advised that the ability to link to our site and the fact that a link exists does not mean that we necessarily endorse, support, sanction, encourage, verify, or agree with the comments, opinions, or statements posted on the web site from which you linked to our site (the “Linking Site”). We are not responsible for any damages or losses arising from any delays, defects or omissions that may exist in the services, information or other content provided in the Linking Site. We make no guarantee or representation as to, and shall have no liability for, any content on any Linking Site, including, without limitation, the accuracy, subject matter, quality, sequence or timeliness of any such content.

6. Indemnity

You agree to indemnify, defend, and hold harmless us, our affiliates and our officers, partners, employees, and agents from and against any and all claims, liabilities, damages, losses, or expenses, including legal fees and costs, arising out of or in any way connected with your breach of the terms of use and/or access to or use of this site.

7. Intellectual property rights

We are the owner or the licensee of all intellectual property rights in our site, and in the materials published on it. Those works are protected by laws and treaties around the world. All such rights are reserved. You may use the materials on our site and download and reproduce them in hard copy for your own reference only. Such materials may not otherwise be reproduced, distributed, stored in a data retrieval system or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise) without our prior written consent. Nothing on our site should be construed as granting any licence or right in relation to any of our trademarks or those of our affiliated companies or any third party.

8. Material Interests

We and our partners, officers and/or employees may have holdings in the investment funds referred to on this site and may otherwise be interested in transactions that you effect in those funds.

9. Your personal data

We may collect and process the following data about you in accordance with the terms of use:

information that you provide by filling in forms on our site, including information provided at the time of registering to use our site, subscribing to our service, posting material or requesting further services;

if you contact us, we may keep a record of that correspondence;

details of your visits to our site and the materials and information that you access, for the following purposes:

to provide you with information, products or services that you request from us or which we consider may interest you, where you have consented to be contacted for such purposes;

to allow you to participate in interactive features of our service, when you choose to do so;

to determine your suitability to be granted access to our site.

10. Disclosure of your personal data

Any personal data relating to you will be collected, used and recorded by us in accordance with the Data Protection Act of 1998 and will comply with relevant legislative changes, the Terms of Use and our Privacy Policy below. You must read our Privacy Policy as it forms part of the Terms of Use. By using this site, you consent to processing of your personal data in accordance with our terms of use and you warrant that all data provided by you is accurate.

11. Our website uses Cookies

Cookies are small text files which are placed on the computer of a website user to provide the website operator with information about use of the site. We use Google Analytics cookies to collect information, in an anonymous form, about how visitors use our site and to prepare reports for statistical analysis. The information collected includes the number of visitors to the site, where visitors have come to the site from and the pages that they have visited. We use the information to help us improve the site and users’ experience of it.

By accepting these website terms of use you consent to the use of these cookies for these purposes.

12. Law and variation

These terms of use and any non-contractual obligations arising from or connected with them shall be governed by and shall be construed in accordance with English law. English courts will have exclusive jurisdiction over any dispute arising from, or related to, use of our site (whether arising out of or in connection with contractual or non-contractual obligations) (“proceedings”) and it is a condition of using our site that you waive any objection to proceedings in such courts on the grounds of venue or that proceedings have been brought in an inconvenient forum, although we retain the right to bring proceedings against you for breach of these terms of use in your country of residence or any other relevant country.

We may revise these terms of use at any time by amending this page. You are expected to check this page from time to time to take notice of any changes we made, as by using our site you acknowledge that you have accepted any such amendments.