Fund managing far from gloomy in the North

One manager in Yorkshire leads the pack of best-performers, says Jenne Mannion. The quality of work matches the quality of life he prefers to the City rat race

Last year was dire in performance terms for many UK fund managers, but the relatively unknown Mark Hall, of the Leeds-based stockbroking firm BWD Rensburg, 2002 was a huge success. Mr Hall's £30m BWD Aggressive Growth fund was the best-performing of 284 funds in the UK All Companies sector over 2002, say Standard & Poor's.

The fund, launched on 1 October 2001, had been in the pipeline for some time, and the group decided to start it up despite uncertainty caused by the atrocities in the United States the month before.

Mr Hall has worked at Rensburg for 15 years and managed the high-performance BWD Equity Growth. In his mid-thirties, he says he is a true stock-picker. But his new BWD fund is carefully structured into two parts to ensure he holds companies whose share prices should rise over the short term, as well as those reckoned to make long-term gains.

The core of the portfolio – which accounts for two-thirds of the assets – has stocks where he is taking a two- to three-year view. "I look for ones I consider to be materially undervalued, and wait patiently for this value to emerge," he says. Companies in this category include Anglo Irish Bank and the inter-dealer broker, ICAP.

The other third of the portfolio is more opportunistic and based on shorter-term market themes. This is where Mr Hall aims to capitalise on shorter-term market movements. No particular type of stock fits into this category, he says. It could be any company where the share price is depressed but a recovery is likely soon.

For example, when the UK market bottomed out, then rallied after the 11 September atrocities, many investors were piling their money into blue-chip stocks, leaving the smaller and medium-sized companies behind. Mr Hall, rightly as it has turned out, believed good gains could be made as this neglected sector played catch-up with the rest of the market. He invested in many smaller media and technology companies and enjoyed healthy gains within months.

By November 2001, these media and technology companies had reached their price targets, so he sold them and recycled much of the gains into defensive companies such as the gas and electricity supplier Lattice Group, the BAT tobacco giant and GlaxoSmithKline, the pharmaceuticals group.

Mr Hall attributes his performance success largely to setting these price targets and being disciplined about them. When he buys a company, he determines his idea of the true price. When it hits that number, he will sell.

"Two key words with this fund are discipline and patience," he says. "I have to have real patience and wait for good buying opportunities. I also have to retain strong sell disciplines and not be distracted from taking profits when stocks hit their targets."

Indeed, the same applies on the downside and if a share price falls below a certain level, it will often be sold. "Operating an effective stop-loss policy is vital to maintaining performance. If something works against me, I have to retain my discipline and ask whether the story has changed. If I don't believe that it has, then there may be a case for buying more shares in that company now that it is cheaper," he says.

BWD Aggressive Growth has a concentrated portfolio, holding 45 companies. Mr Hall aims to have a minimum of 1 per cent and maximum of 5 per cent in each company. Another way in which he can be aggressive is in the amount of cash held, a maximum of 25 per cent. During last summer, he held around 15 to 20 per cent of the portfolio in cash, another wise move considering the market continued to fall.

The fund manager is quick to point out that this position is often not about taking a negative view on the stock market. "The ability to hold a high amount of cash is important because it gives me the flexibility to await genuine buying opportunities and not be rushed into reinvesting money from taking profits in another area, or from new cash into the fund," Mr Hall says. "The benefit could be seen in May last year when we had been taking profits on industrial cyclical stocks, then held on to the proceeds during the market falls in June and July."

Although Rensburg is a small boutique firm, on the banks of the Leeds-Liverpool canal in Leeds, West Yorkshire, Mr Hall says he is not a one-man band. He and two colleagues, Colin Morton and Stuart Sharp, have been working as a team at Rensburg since 1991. Mr Morton manages BWD Blue Chip and Mr Sharp the BWD UK Smaller Companies, both of which have also been highly successful. This means Mr Hall has expert help researching UK companies and meeting their managements.

Although many larger London-based fund management houses would love to recruit a manager with Mr Hall's ability, he says he will not leave Rensburg to join the pin-striped brigade in the City. Mr Hall, who has two young children, says quality of life is of utmost importance and he plans to stay in Leeds for the long haul.

"I have tried life in the big city, having lived in London for 18 months when I left university, and it wasn't for me," he says. "I couldn't wait to come back up north. Being from the Yorkshire dales, I love the open air and being out on the hills. I appreciate the quality of life."