By Chanyaporn Chanjaroen
Feb. 26 (Bloomberg) — Graham Birch was the best natural- resource stock picker in Britain for a decade. Now most of the stock he owns has four legs and a tail. His knee-high boots are caked thick with mud as he climbs onto his tractor to stack hay in a barn on one of his two dairy and sheep farms, which at 3,658 acres are more than five times the size of the City, London’s financial district where Birch worked for a quarter-century. The first time he showed up at the farm in Dorset in southwest England with his Aston Martin Vantage, people snickered. He leaves the sports car home now. At 49, Birch abandoned his life at New York-based BlackRock Inc., the world’s largest money manager, where he oversaw $36 billion and ran five commodities-related funds himself. He said he became exhausted worrying about other people’s pensions. “It’s not the hours themselves – it’s the responsibility,” said Birch, who headed BlackRock’s natural- resources team for 11 years. “At the peak we had $40 billion of people’s savings. That’s like a weight that pushes down all the time. I couldn’t do that forever.”
The BlackRock Gold and General Fund, which Birch managed from 1999 until last year, was the top performer among 858 U.K.- domiciled mutual funds over the last decade, rising almost 23 percent annually, according to Chicago-based investment research firm Morningstar Inc. The fund lost 17 percent in 2008, when the global financial crisis caused the biggest declines in commodities since at least 1956, still better than the 20 percent drop among its peers, data compiled by Bloomberg show.
Birch was widely quoted on the commodities boom over the last decade, offering up opinions on everything from gold to aluminum to Russian mining stocks. He steered his funds through a thicket of takeovers, including BHP Billiton Ltd.’s failed attempt in 2008 to buy Rio Tinto Group, which would have been the largest mining acquisition in history.
“Graham is very knowledgeable on his sector,” said Jackie Beard, head of U.K. fund research at Morningstar in London. “His entire life has been spent looking at resources.” Unlike some other managers, Birch and the group he built wouldn’t buy shares in any company unless they visited the mines, Beard said. Birch has traded a life he knew well and made him wealthy – – one lived in dark business suits, on airplanes, and delivering speeches and forecasts at mining conferences — for a world he didn’t. “I had never driven a tractor,” he said.
And that was just the point. “I needed a complete change,” he said.
‘Can’t Be Sentimental’
He spends most of his time managing his two farms near Blandford Forum, Dorset, a scenic market town 118 miles southwest of London on the bank of the River Stour. He has 560 dairy cows, 1,000 pregnant sheep and a storage tank filled with four million liters (1 million gallons) of manure used for fertilizer. He produces three million liters of milk a year, enough to fill an Olympic swimming pool. Birch, who helped start and run a BlackRock hedge fund focused on agriculture, brings a money manager’s sensibility to raising cows. “You can’t be sentimental about it,” he said, the snow coming down around him. “These are adorable, but in a year we’re going to sell them.”
With the guidance of Scott Bagwell, his 30-year-old farm manager who grew up a mile away as a son of a herdsman, Birch learned to drive a tractor. He sometimes helps with the afternoon milking. He makes his own cheddar cheese and sloe gin.
Birch tested the water by taking a sabbatical leave from BlackRock from April 2009 and was supposed to return this year. In January, he resigned instead.
Didn’t Miss Job
“I wanted to see whether I would miss the job and discovered that I didn’t miss it much at all,” said Birch, who has a doctorate in mining geology from Imperial College in London. “Fifteen years is long enough to do one thing,” he said. “I’ve been to every Rio Tinto results presentation for like 25 years. I began to think I’m not learning anything new. If you stop learning new things, life becomes very, very boring.”
His wife, Margaret Scribbins, 50, said change has been good for the whole family, including their five children. They live in St. Albans, 126 miles from Dorset, and plan to stay there until the youngest children, 13-year-old twins, finish school. Scribbins, an accountant by training, keeps the books.
“He looks five years younger with the farm,” she said of her husband, who has lost 14 pounds.
Birch hasn’t completely abandoned his old life. He still holds some agricultural stocks including St. Louis-based Monsanto Co., the world’s largest seed maker, and follows the mining news from his computer in his spartan office on the farm. He joined London-based gold producer Petropavlovsk Plc this month as a non-executive director. If he ever went back to managing money, it would have to be a much smaller place than BlackRock “where I could make a real difference as an individual,” he said. He has no plans to do that, though.
Birch has gone from being “very well paid” at BlackRock to pouring money into his farm: 400,000 pounds ($609,300) for a grain storage building, 150,000 pounds for a new harvester, 50,000 pounds for new barns. He hopes to start turning a profit this year. He takes no salary from the farm. The number of U.K. dairy farms has fallen 54 percent since 1995, according to the Dairy Farming Information Centre, a non- profit group funded by milk producers. Prices paid to farmers were down 5 percent last year compared with 1995, data from the Department for Environment, Food and Rural Affairs show.
Birch is betting the market is turning. He has seen this before in the commodities cycle.
‘Prices Too Low’
“As more of the farms get pushed out of the business, the farms that remain get the opportunity,” said Birch, whose largest farm is 17 times the average size in the U.K. “As long as demand is there, which is the case for dairy products, then prices will go up. “We’ve seen it in gold, copper,” he said. “I think we’re heading that way with agricultural business. That’s why we got into agriculture. Prices have been too low for too long.”
Rising prices for U.K. farmland have made Birch’s gamble a good bet so far. Since he first bought land in southwest England in October 2007, prices have risen 28 percent, according to London-based property adviser Knight Frank LLP. BHP Billiton, the world’s largest miner held by BlackRock, is up 1.9 percent. Gold is 36 percent higher.
It’s about more than money, he said. He’s done that. Now, on the cusp of 50, it’s about trying something new.
“Two thousand lambs are going to be born over the four weeks” starting in late March, Birch said. “It is going to be hectic.”
To contact the reporter on this story: Chanyaporn Chanjaroen in London at firstname.lastname@example.org.
Last Updated: February 25, 2010 19:01 EST