Andy Brown, possibly the most profitable UK-based investment manager as well one of the most highly remunerated, experienced an effective pay-cut for the year to 31 October 2019, according to recent filings at Companies House.
Mr Brown, the founding chief executive and controlling party of London-based Cedar Rock Capital, received £42.1 million in dividends in addition to his salary of £190,000.
This compares with a dividend payment of £46.0 million received in the previous year although his salary remained the same.
Cedar Rock’s six other shareholders shared dividend payments of £29.50 million, £1.54 million lower than for the year to 31 October 2018.
Despite the lower dividends received by shareholders, however, Cedar Rock’s turnover and pre-tax profits continued to increase.
Turnover came in at £95.9 million, a £3.3 million or 3.6 percent increase on the previous year’s £92.6 million.
Pre-tax profits amounted to £90.7 million, a £2.9 million or 3.3 percent increase on the £87.7 million recorded for the year to 31 October 2018.
This meant that Cedar Rock generated a pre-tax margin of 94.5 percent to maintain its record of generating annual margins of around 90 percent.
Assets under management increased by around 2 percent from $12.4 billion to $12.7 billion.
Cedar Rock is currently closed to new clients.
Established by Mr Brown, a former investment manager at Morgan Stanley Investment Management (MSIM) in 2002, Cedar Rock focuses on managing a small number of concentrated long-only equity portfolios for endowments, foundations, families and corporate pension funds.
Its investment strategy, which Mr Brown developed while at Morgan Stanley, focuses on identifying high quality companies capable of generating high returns on capital employed without requiring financial leverage.
This is very similar to the strategy employed by Terry Smith at Fundsmith.
Indeed, according to some sources Mr Brown may have been employed as investment adviser for the Tullett Prebon pension fund which Mr Smith oversaw during his time as chief executive with the latter firm prior to the establishment of Fundsmith in 2010.
Mr Brown’s strategy clearly generates very good performance, at least according to the data compiled by TipRanks, a US-based investment performance and analysis specialist.
Cedar Rock Capital Limited, a US pooled investment fund managed by Mr Brown, has generated annualised average returns of 31.63 percent for the three years to 21 March 2020 with a Sharpe Ratio of 5.85.
It has produced total returns of 256.8 percent since 2012 compared to the S&P 500’s 151.4 percent and the 49.4 percent returned by the “average” hedge fund.
At 31 March 2020 the US fund’s portfolio was very concentrated and consisted of just seven positions.
These were Procter & Gamble, which accounted for 32.17 percent of the fund’s $3.7 billion of assets; Philip Morris (18.07 percent); Starbucks (14.7 percent); Clorox (12.1 percent); Automatic Data Processing (10,5 percent), Reurig Dr Pepper (5.85 percent) and Zebra Technologies (5.42 percent).
Consumer goods accounted for 69.1 percent of portfolio assets followed by technology (16.1 percent), services (14.8 percent) and healthcare (0.6 percent).
