Mark Dampier: New fund has mix of age and experience
Saturday 11 June 2011
New fund launches often sound exciting, but for me it's the experience of the manager launching the fund that really counts. So the launch of Marlborough's Multi Cap Income fund, managed by Giles Hargreave and Siddarth Chand Lall, immediately caught my eye. The record of Marlborough Special Situations and Marlborough Micro Cap Growth should speak for themselves, but for those unaware Marlborough Special Situations is the best performing unit trust across all sectors since launch in July 1995, having risen 1360 per cent.
This is Giles Hargreave and Siddarth Chand Lall's first foray into equity income and the key question is: can they make the transition? Frankly I see no reason why not. I rarely take much notice of back testing, but it is interesting to note that had the fund launched a year ago with their current portfolio of stocks, they believe it would have grown well over 50 per cent. This at a time when equity income has struggled.
A key attraction will be their focus on medium-sized and smaller companies, their specialist area. Funds from Chelverton and Unicorn have stood out in the smaller company universe recently, but few others have. This new fund should be a welcome addition in a sector where many well-known funds hunt in the large cap arena. The fund will certainly have some exposure to large companies to help with liquidity – a key consideration when investing in smaller businesses.
The investable universe for the fund is 717 companies which Giles Hargreave and Siddarth Chand Lall reduce to around 500 using their own filters. They look for a minimum dividend yield of 2 per cent, but are not chasing yield for the sake of it. They are looking for strong dividend players that can not only sustain, but grow their dividend in the years ahead. This will become increasingly important, especially for an ageing population facing rising living costs. In this situation a growing income is far more valuable than one that is fixed.
Critics might argue there is over-reliance on Giles Hargreave, chief executive of Hargreaves Hale, and point to his age of 62. Having met Mr Hargreave a number of times I see no sign of his appetite for the job or work ethic waning. Furthermore, he has surrounded himself with a strong team. Co-manager Siddarth Chand Lall is 31 years old and joined Hargreave Hale in 2007. Giles Hargreave has blended young and old into a team with over 125 years of market experience. The result is a vast swathe of contacts and a huge network of brokers from which to generate ideas.
As stock pickers they also meet senior management of companies, in many cases having an existing relationships garnered from previous successes. The team combines this with rigorous analysis of financial statements and testing of their models; essentially looking to establish the sustainability of dividend payments. Their ideas are discussed at formal weekly meetings, and in essence when buying this fund you are buying the decades of experience sat round this table.
A degree of volatility should be expected from a fund focusing on smaller companies, but I welcome this in a space dominated by some very large players. This fund could dovetail well with funds such as Invesco Perpetual Income, Artemis Income and PSigma Income, all funds I have highlighted before in this column.
Finally, I have to admit that given the performance of Giles Hargreave and his team over the years it is a wonder they are not better known. One thing I do know is they won't let this fund grow to billions of pounds. They probably don't want more than about £200m, so if you like the story acting quickly is the order of the day.
Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds included in this column, visit www.h-l.co.uk/independent
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