Investment

Lord Weinstock, the long-term approach, and Troy Asset Management

In his day, the late Lord Arnold Weinstock was a colossus of postwar industrial life in the UK. His acquisitions and thrift made GEC the UK’s leading defence and electronics contractor. 

At all times, GEC kept enough cash on its balance sheet, to protect against recessions, which is precisely how Troy Asset Management, co-founded by him in 2000, likes to do business. 

In the year to April, according to its newly-filed accounts, Troy’s pre-tax profits rose 22% to £41.1 million, as funds totalling £13.8 billion accessed its risk-averse strategies. 

Troy has never been averse to interesting opportunities but its priority has always been to protect clients against loss

The group’s cash pile of £57 million, enough to cover fixed expenditure for three years. Turnover rose 19% to £99 billion.  Troy’s 41% operating margin is above average for the sector. But it has started to benefit from a bull market in caution, unlikely to abate for years to come. 

The value of this approach became clear during Weinstock’s final years at GEC – following the death of his son and designated successor Simon – when the City developed the view his £3 billion cash pile was a drag on GEC rather than an insurance policy.

Weinstock was ousted as CEO. His successors, led by former investment banker John Mayo, spent his cash, rationalized his assets and embarked on a debt-fuelled orgy of acquisitions to turn GEC renamed Marconi, into a global tech and telecom player.

But Marconi overpaid. Its strategy collapsed after the bull market in 2000. At the peak, GEC’s market value was £35 billion. It was next to nothing when Weinstock died in 2002 – a sad illustration of the way chief executives and their overconfident advisers indulged in deals that wrecked large parts of the UK’s industrial base in the 1980s and 1990s 

Weinstock founded Troy Asset Management with Sebastian Lyon, naming the business after his winning horse at the Epsom Derby in 1979.

Under Lyon, Troy has never been averse to interesting opportunities but its priority has always been to protect clients against loss.

When growth stocks surged, its flagship Trojan Fund lagged, sometimes quite badly. But the preservation of capital has brought greater benefits. 

Since inception in June 2001, the fund produced a return of 328% against 192% from the FTSE All-Share and 79% from the UK retail price index. In November, the fund was 40% equities, 32% index-linked bonds, 11% gold and 17% cash or near cash.

It goes without saying that remuneration at Troy has benefited from its profit rise. Overall salaries rose 15% to £25.3 million and its best paid director saw pay go up 27% to £11.2 million.  But Troy’s directors are paid to resist the siren song of market momentum and this is what they have achieved. 

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