[1gp - 12] money/national/pages 13/05/12

8
MONEY
thesundaytimes.co.uk/money
13.05.12
VICKI COUCHMAN
FAME & FORTUNE
TIM GUINNESS TALKS TO HARRIET MEYER
Japan is
finally on
the move
The fund manager is focused on energy
and Asia, but his favourite investment is a
classic British creation with two wheels
TIM GUINNESS, the fund manager and
founder of Guinness Asset Management,
has made a healthy return from an early
investment in folding bicycles — both
financially and physically. The City
veteran uses a Brompton bike, a favourite
of commuters who like to save time and
money and boost their fitness.
He is a descendant of Sir Arthur
Guinness, the brewer. After Eton he read
engineering at Cambridge University,
then business at Massachusetts Institute
of Technology (MIT).
He joined Guinness Mahon, the
Irish merchant bank, in 1977 and 10 years
later co-founded Guinness Flight Global
Asset Management, staying on as
chairman after it was bought by
Investec.
In 2003 he founded Guinness Asset
Management. With Guinness Atkinson,
its American sister company, it has £550m
under management.
Guinness, 64, lives in London and
Hampshire with his wife Beverley, 63.
They have four children: Edward, 35,
Mary, 33, Katy, 32, and Harry, 27.
How much money do you have
in your wallet?
My colleagues will tell you I never have
enough to pay the taxi fare. I hardly use
cash and prefer to travel by bike and on
the Tube.
What credit cards do you use?
I try not to use them unless I’m in a
situation where my debit card doesn’t
work, as it didn’t in Tokyo last month,
which was very frustrating. I have a Royal
Bank of Scotland credit card and an
American Express card, and I use them
each about once a year.
Are you a saver or a spender?
My wife has the PhD in spending. I doubt
that price comparison websites and
charity shops have a more avid user.
Comparison sites are a good idea and
websites such as kayak.co.uk are terrific
for travel deals — I seem to be better at it
than the travel agent.
How much did you earn last year?
It was six figures. I take out what we need
to live on. As I own about 80% of the firm
and about 40% of its American sister
company, I like to retain as much as I can
in the business.
Have you ever been really hard up?
Not really. My father was a naval officer
and then built a rural electricity supply
company that was nationalised. He saved
to educate me at good schools. I got a small
lump sum to help me on my way —
enough for the deposit on my first house.
I’ve earned my way in the world ever since.
What was your first job?
I was headhunted from MIT by Barings
bank. I started as a junior corporate
financier and spent a wonderful seven
years there learning a lot and making
many good friends.
What’s the most lucrative
work you’ve done?
The years spent building up Guinness
Flight with Howard Flight. Happy,
challenging, but successful years. More
recently, it was building up the Guinness
Flight Global Energy fund from $3m to
$2 billion (£1.24 billion). It has provided
the capital to enable Guinness Asset
Management and its US sister firm to
really get going.
Tim Guinness is chairman of Brompton Bicycle and is sitting on a healthy investment in the company, which was founded by a university friend
Are you better off than your parents?
I’m better off than my father, definitely.
My mother was a banker’s daughter,
from the Hoare family, and brought up
in a big house down the road from my
Hampshire home.
Do you invest in shares?
I use our own funds, which are focused on
energy and Asia, to invest in shares. We
recently increased our exposure to
companies in horizontal drilling for
natural gas, known as fracking, including
Devon and Chesapeake Energy.
The Global Energy fund also owns
Ophir, a British oil and gas explorer active
in East Africa, and Kentz, which is
developing a Middle Eastern oil and gas
services business.
People have been predicting the end of
the grinding bear market in Japanese
equities for more than 20 years, but I think
we are very close, so I wouldn’t hold back
on investing there.
I’m chairman of the Atlantis Japan
Growth fund and have had an investment
in it for some time.
What about worst?
I’ve made some private equity investment
howlers, such as a new television
company in 2000. It was a total flop.
Do you own a property?
I own the house in which I was brought
up in Hampshire, in the beautiful village
of Ellisfield, and a convenient house in
Westminster, so I can cycle everywhere
in London.
There is also a villa by Lake Como,
Italy, which I bought in 1999, after
Investec acquired Guinness Flight.
I have also just bought a one-acre plot
of wood near my Hampshire home,
which I am planting with English
wildflowers.
What’s been your best investment?
What’s better for retirement — property
or pension?
I believe everyone should try to end up in
their own house, debt-free, with enough
saved to look after themselves in old age
and their families and to help educate
their grandchildren. I’m lucky enough to
have lived in a period when that was
much easier, and I worry a bit about the
world in which my children and
grandchildren now find themselves.
Do you manage your financial affairs?
I have invested in a number of
companies. About nine years ago, I put
£1,000 in Lulu Guinness, the handbag
designer, and in Cath Kidston, the
homeware and bags retailer. The stake in
Cath Kidston went up 100 times by the
time a private equity firm bought the
company in 2010.
The private equity investment I have
enjoyed the most is a 5% holding in
Brompton Bicycle, of which I am
chairman. I bought 5,000 shares for
£30 each in 1998. The shares last traded
at £140.
The company was founded by a
Cambridge friend, Andrew Ritchie, and is
the best folding bike manufacturer in the
world. The business has been growing
steadily at 15%-20% a year for two decades.
I’ve been riding one in London most days
since 2000. I even rode in the Brompton
World Championship [a 13km race] at
Blenheim, Oxfordshire, last year.
Yes, but when you are managing other
people’s money it’s too distracting to run
‘‘
an active portfolio of one’s own quoted
investments.
What’s the most extravagant
thing you have ever bought?
An eighth share in an 86ft sloop to sail
around the world. I crossed the Pacific
from Panama via the Galapagos to the
Marquesas in French Polynesia in
April/May 2010. It took four weeks to sail
from Panama to Fatu Hiva.
Sadly, it cost so much that we had to
sell it — I’d be divorced otherwise. The
boat cost less than £1m, but the running
costs, such as hiring crew and keeping it
in good repair, were several hundred
thousand pounds a year. We sold for
rather less than we bought for.
What aspect of the tax system
would you change?
The Mirrlees review [in 2010] concluded
that if we levied a uniform rate of Vat on
almost everything, we could raise tax
credits, benefits and pensions, lift the
income tax threshold by £1,000, cut the
basic rate of tax to 18% and the higher rate
to 38.5%, and leave pretty much everyone
better off.
FOR 20 YEARS PEOPLE
HAVE PREDICTED THE
END OF THE BEAR
MARKET IN JAPAN.
I THINK WE’RE CLOSE
What’s your financial priority?
Building up Guinness Asset Management.
Do you play the lottery?
No — the odds are too poor. I’d rather earn
my fortune by a mixture of hard work and
making well-calculated bets.
What’s the most important lesson
you’ve learnt about money?
Diversification, and the need to take a
long-term view.
First-timers offered chance
to lock in for seven years
Esther Shaw
FIRST-TIME buyers can lock
into the security of a sevenyear fixed rate under a new
government-backed home
loan from Santander.
It is the latest lender to join
the NewBuy scheme, set up
to give borrowers with only a
5% deposit access to competitive mortgages for new-build
properties.
NatWest, Nationwide, Halifax and Barclays also offer
loans under the scheme,
launched in March, but
Santander is the first to give
the added security of a sevenyear fix.
The deal, available from
tomorrow, has a rate of 5.99%
and a £99 fee. It is the only fix
longer than five years on the
market for first-timers.
Santander is also offering
three- and five-year fixes,
both at 5.49% with a £99 fee.
For buyers seeking a twoyear fix, NatWest has a deal at
4.79%, with a £499 fee.
NewBuy, which is open to
first-time buyers and existing
homeowners, aims to kickstart a housing market
revival. The loans are partly
guaranteed by the government and housebuilders, protecting lenders from losses if
properties are repossessed.
David Hollingworth of
London & Country, the
broker, said: “Those with 5%
deposits looking for comparable deals from lenders not
in NewBuy will find little
around.”
However, builders have
criticised the rates charged by
lenders under the scheme. It
was hoped there would be a
choice at less than 5%.
Barratt, the housebuilder,
last week revealed that just 70
of its homes had been
reserved under NewBuy, but
it said that 1,600 potential purchasers were registering an
interest every week.
NewBuy lenders have even
raised rates in recent weeks.
NatWest’s two-year fix was
initially 4.29%, and it has
increased its five-year fix
from 4.99% to 5.49%.
The availability of residential mortgages across the
market has slumped in recent
months and the criteria used
by lenders to decide whether
to approve applications have
been significantly tightened.
This is because the eurozone
crisis has made it more costly
for banks and building societies to raise finance on the
wholesale markets. Figures
from the Bank of England
showed that the rise in residential mortgage rates last
month was the greatest since
July 2009. Borrowers taking
out a two-year fix paid an
average of 3.65%, up from
3.44% in March.
A number of lenders have
raised the rates on mainstream home loans in the
past week, including Halifax,
First Direct and Norwich &
Peterborough.
Banks have been particularly keen to scale back
lending to borrowers with
small deposits. Loans to firsttime buyers have also
declined since the end of the
stamp duty holiday at the end
of March.
Figures from E.Surv, the
valuations company, show
that mortgage approvals for
first-timers fell to their
lowest level for nine months
in April.
The pick of deals for first-timers
Two-year fixed-rates
Source: London &
Country Mortgages
NatWest
Newcastle
First Direct
NewBuy
5% deposit
5% deposit
10% deposit
4.79%
5.65%
4.19%
£499 fee
No fee
£999 fee
The number of loans on
typical first-time buyer properties (worth up to £125,000)
fell to just 11,307, 5% lower
than in March and 1.2% down
on April last year.
The number of loans
granted to borrowers with a
deposit of 15% or less fell to
5,309, well below the threemonth average of 6,229.
Santander last week tightened up the criteria for
buyers purchasing a newly
built property outside the
NewBuy scheme.
For those purchasing a new
flat, the bank previously
required a 30% deposit from
second-time buyers and
those looking to remortgage,
but just 20% from firsttimers. It now requires a
deposit of at least 25% from all
potential borrowers.
For those acquiring a new
house, Santander’s minimum
deposit requirement was previously 10% for first-time
buyers and 20% from other
borrowers. Now, all buyers
will need to provide a deposit
of 15%. The changes came into
effect on Friday.
Aaron Strutt of Trinity
Financial, the broker, said:
“This will make life more difficult for those trying to purchase a new-build home and
will not help that section of
the market.”
One of the most generous
lenders for freshly built properties is now the Woolwich,
the mortgage arm of Barclays. It requires a deposit of
15% on both flats and houses.