Dark days for investors as fund stars lose their shine
Some stellar performers have seen their touch desert them in the global market turmoil
Sunday 20 November 2011
When a football team performs badly, you rarely see the manager making a public apology for his own strategy and player selection.
It's also rare that, in the world of finance, you find a fund manager who concedes some investment decisions were wrong and apologises to investors for the fund's poor performance.
But earlier last week, Anthony Bolton, one of the UK's most renowned investment managers, apologised after his Fidelity China Special Situations fund lost 28.9 per cent in value over just six months.
As with football, fund management is a results-driven business and pressure builds if performance is not great, even for those managers who have built a stellar reputation over the years by running highly successful funds. Some of them have seen the tables turn recently, with their funds among the worst performers.
Mr Bolton is highly regarded for his 28 years of managing Fidelity's Special Situations, but the past 12 months have been tough for his China fund. Advisers say this could be typical of a manager moving into an investment area which is not their primary expertise. Adrian Lowcock, a senior adviser at Bestinvest, says: "The message for investors is a manager can excel in one area but the expertise does not necessarily translate in another, as the manager sometimes lacks understanding of the culture, a network of contacts and experience in the region."
But there are other top managers who have seen their funds fall more than other, less experienced and renowned managers over the past year. By taking over the reins of Bolton's Special Situations fund, Sanjeev Shah was always going to have a tough job matching performance.
Darius McDermott, the managing director of Chelsea Financial Services, says: "Shah had run Fidelity UK Aggressive successfully and then had a couple of years running European funds. His first year running Special Situations placed him in the top 10 per cent of UK managers."
However, over the past 12 months, Shah's fund is down around 10 per cent, faring worse than other similar funds. This performance is due to a number of reasons: not owning stock in some of the more highly priced sectors, such as energy company Shell, has had an impact, as has his high exposure to Lloyds Banking Group.
Mr McDermott adds: "We continue to have faith in Shah, believing his style has not been suited to the market conditions over the past 12 or so months and that he will return to the top end of performers in the UK All Companies sector."
It has not been a good year for investors in Mark Lyttleton's BlackRock UK Absolute Alpha fund, which is down around 4 per cent. Ben Willis, the head of research at Whitechurch Securities, says the fund's lacklustre performance may be due to its size, with Lyttleton managing around £1.5bn of investors' money. Running this much can make it difficult to buy a meaningful amount in any one stock and affect the fund's performance.
Advisers agree that Felix Wintle, at Neptune Investment Management, is another highly respected manager with an excellent long-term track record. But over the past year, he is among the worst performers compared with other funds investing in North America, with his fund down more than 3 per cent. According to Mr Willis, the fund was impacted by Mr Wintle's large purchase of "defensive" stocks, such as pharmaceutical companies, at the wrong time. However, Mr Willis says: "Wintle's longer-term fund performance has been excellent and it is not unreasonable to expect a return to form and for this fund to start delivering again."
Despite these slips by top managers, it is important investors do not place too much store on short-term performance. Patrick Connolly, from independent financial advisers AWD Chase de Vere, says: "It would be wrong to assume that just because a fund manager underperforms in the short-term that they are a poor fund manager. Some very good managers have performed poorly in the short-term when their investment style is out of favour. It is better to judge fund managers over a longer period."
On the other side of the coin, some less prominent fund managers are now being tipped as rising stars. Ariel Bezalel, the manager of the Jupiter Strategic Bond fund, has proven adept at seeking out the best opportunities within global debt markets. Mr Willis says: "We have invested with Bezalel for over two-and-a-half years and the manager has produced some truly excellent returns over the period."
Another manager who has flourished is Julie Dean, who runs a few funds including Cazenove UK Opportunities. Mr Willis says: "We have been impressed with the investment process and results of Dean's management of the Cazenove UK Opportunities for some time. Recently her reputation was further enhanced as Cazenove appointed her co-manager on both its UK Growth & Income and UK Absolute Target funds as of July this year. Since being appointed she has already made a positive impact on both funds."
While keeping an eye on these rising stars, though, investors would do well to remember that established and renowned managers have built their reputation on past successes, and should not be dismissed for recent lagging performance.
Emma Dunkley is a reporter at citywire.co.uk
Adrian Lowcock, Bestinvest
'Stock markets are unpredictable and there will be periods where even the star fund managers will not consistently perform. Indeed, some of the very best managers will often have times where they disappoint – this does not mean that they have lost their skills, but that the market may not be behaving rationally, and that they are looking through the noise.'
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Pope Francis issues top 10 tips for happiness
- 2 Disney heiress Abigail disowns her share of family profits in West Bank company
- 3 The secret report that helps Israel hide facts
- 4 Now diplomacy has failed, boycotting Israel might be the only way we can protect the people of Gaza
- 5 Israel's propaganda machine is finally starting to misfire
The secret report that helps Israel hide facts
Land for gas: Merkel and Putin discussed secret deal could end Ukraine crisis
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Boozy, ignorant, intolerant, but very polite – Britain as others see us
- < Previous
- Next >
iJobs Money & Business
£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...
£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...
£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...
Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...
Day In a Page
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000