'Great Gatsbys' that repeat past successes

The Fund Manager: Harry Morgan, Manager of Edinburgh Managed Growth Portfolio Trust

By Keiron Root

By Keiron Root

4 October 2000

Harry Morgan, the manager of Edinburgh Managed Growth Portfolio Trust, began as a private client stockbroker. "I graduated in history from Cambridge and got a job with a stockbroking firm because that was what you did with that academic background," he says. "I had a traineeship with Henderson Crosthwaite, now part of Investec, and was there for five years or so."

He moved to Edinburgh to join Adam & Co, an established private bank. Four years ago, he moved to Edinburgh Fund Managers as head of its private client team.

Mr Morgan has responsibility for several funds, chiefly the Edinburgh Managed Portfolio, a "fund of funds" unit trust that offers investors a portfolio of other collective funds, rather than direct shareholdings. "Essentially, a fund of funds is a way of accessing the expertise of a number of unit trust managers which, if put together in the right combination, will outperform your benchmark.

"They are simple products. You invest in one fund and you only have to deal with one piece of paper as far as tax is concerned. But at the same time, they are a classic way of reducing risk because you are getting exposure to a range of markets, a range of stocks and a range of underlying funds. The result is that risk teeters into blandness.

"The downside is the element of double-charging and there is really no way round that, although we hope that, with our buying power, we can reduce the costs significantly. With one exception, we get substantial trail commission from all of the funds we hold which we put straight back into the fund. This means it can be more cost-effective for investors to use our funds than to buy the underlying funds directly.

"If I get money coming into the fund, I do not have to invest it immediately. If we don't like the look of the market, we will run the fund with quite a high cash position - up to 7 or 8 per cent - which is not the case with many other retail funds."

The fund of funds is a recent success. "In the early days, fund of funds managers would simply look for a fund with a good performance record and buy that, but these days you have to be more professional and be seen to be more professional. This means we have a rigorous investment process within the group, trying to agree a strategy on where we think markets are going to go on a global scale.

"In the overseas part of the portfolio, we favour the US over continental Europe. Recently, we have had 11 to 12 per cent in Europe and 7 to 8 per cent in the US, but we may switch that around, or have similar proportions in both regions. We are still cautious on the whole of the Far East and will have no more than 3 per cent in Japan. We tend to work around bands with about 55 per cent in the UK, 30 per cent in overseas markets and 15 per cent in cash and bonds. We never have less than 50 per cent in the UK."

Another key aspect of the Portfolio fund is that it is not limited to investing in Edinburgh's other funds, but can select from the whole UK market. Indeed, there has to be a very good reason for another Edinburgh-managed fund to be included in the portfolio.

"For the smaller company part of the portfolio, at the moment we like our own fund, Edinburgh UK Smaller Companies, but we can have no more than two of our own funds in the portfolio at any one time," says Mr Morgan. "Outside that, we need to ask ourselves who is good at running the 'middle-of-the-road' core growth funds and the answer would be Deutsche, HSBC, Schroder and Royal & SunAlliance."

The fund is firmly oriented to generating capital growth, based on a group of core funds, including Deutsche UK Blue Chip, HSBC UK Growth & Income, Royal & SunAlliance Equity and Dresdner RCM UK Growth, which account for more than 25 per cent of the portfolio.

"I call these core funds the 'Great Gatsbys', after the line in the book where Gatsby says that you can't repeat the past and the reply is, 'Why, of course you can'. They offer sustained outperformance, consistent returns and consistent personnel. Other good examples would be INVESCO European and our Edinburgh North American fund. Beside these, we like to find the 'seismic shifters', the funds in the right place at the right time with a performance that benefits as a result."

The "seismic shifters", in theory at least, will provide the extra performance that will take the portfolio above its benchmark. With around 1,800 UK authorised unit trusts and OEICs to choose from, a detailed knowledge of management styles and portfolio strategies is essential to identify winners. It is not enough to know a fund is performing well - you have to know why it is performing well and for how long that level of performance is likely to be maintained.

Mr Morgan says: "Take Dresdner UK Growth. It has always been a good fund but last year it had 15 to 20 per cent in information technology. We were into the fund a bit late, but we benefited from the major boost this gave to its performance. Another which could come into this category was S&P Japan Growth, which had a large holding in Softbank. That was largely responsible for it shooting up 200 per cent last year, although it has come down a long way. We sold our holding in S&P Japan and put it into Baillie Gifford Japanese and Schroder Tokyo."

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Voices
Homeless Veterans charity auction: Cook with Angela Hartnett and Neil Borthwick at Merchants Tavern
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm tomorrow
Sport
Amir Khan is engaged in a broader battle than attempting to win a fight with Floyd Mayweather
boxing Exclusive: Amir Khan reveals plans to travel to Pakistan
Arts and Entertainment
J Jefferson Farjeon at home in 1953
booksBooksellers say readers are turning away from modern thrillers and back to golden age of crime writing
News
Stacey Dooley was the only woman to be nominated in last month’s Grierson awards
mediaClare Balding and Davina McCall among those overlooked for Grierson awards
PROMOTED VIDEO
News
Twitchers see things differently, depending on their gender
scienceNew study shows that birdwatching men have a lot in common with their feathered friends...
Voices
Vivienne Westwood and her son Joe Corré deliver an anti-fracking letter to No 10 last week
voicesThe great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
News
i100
Arts and Entertainment
Caroline Flack became the tenth winner of Strictly Come Dancing
tvReview: 'Absolutely phenomenal' Xtra Factor presenter wins Strictly Come Dancing final
News
Xander van der Burgt, at the Royal Botanic Gardens, Kew
scienceA Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
Life and Style
A still from the 1939 film version of Margaret Mitchell's 'Gone with the Wind'
life
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

    $200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

    Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

    $125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

    Sheridan Maine: Commercial Finance Manager

    Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Sheridan Maine: Regulatory Reporting Accountant

    Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Day In a Page

    The week Hollywood got scared and had to grow up a bit

    The week Hollywood got scared and had to grow up a bit

    Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

    Panto dames: before and after

    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
    Thirties murder mystery novel is surprise runaway Christmas hit

    Thirties murder mystery novel is surprise runaway Christmas hit

    Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
    Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

    Anne-Marie Huby: 'Charities deserve the best'

    Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
    The botanist who hunts for giant trees at Kew Gardens

    The man who hunts giants

    A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
    The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

    The 12 ways of Christmas

    We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
    Birdwatching men have a lot in common with their feathered friends, new study shows

    The male exhibits strange behaviour

    A new study shows that birdwatching men have a lot in common with their feathered friends...
    Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

    Famous diaries: Christmas week in history

    Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
    From noble to narky, the fall of the open letter

    From noble to narky, the fall of the open letter

    The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
    A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

    A Christmas ghost story by Alison Moore

    The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
    Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

    Bill Granger's Christmas Eve fish feast

    Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
    Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

    Rodgers fights for his reputation

    Liverpool manager tries to stay on his feet despite waves of criticism
    Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

    Amir Khan attacks the Taliban

    'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
    Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

    Michael Calvin's Last Word

    Sepp Blatter is my man of the year in sport. Bring on 2015, quick