Mark Dampier: Ten years on, and you can still bank on Ian McVeigh
Friday 07 June 2013
Investors need to take care when looking at a fund's performance history. A five- or ten-year track record might be available, but it doesn't mean the same manager has been at the helm throughout. Continuity of management is a rare thing these days. Fund managers move around regularly, making it difficult for investors to track their progress.
For those of us who support active fund management it is always encouraging to see a manager stay in his role for the long term, showing little sign of wanting to move on. Ian McVeigh is just such a fund manager. He recently celebrated his tenth anniversary on the Jupiter UK Growth Fund. Over that past ten years the fund has grown by approximately 215 per cent compared with 144 per cent for the FTSE All Share Index.
The fund has also outperformed its benchmark over one, three and five years, but it has not all been plain sailing. Despite going into the financial crisis of 2008 with an underweight position in banks Mr McVeigh did not appreciate the extent of the problems or the economic dislocation that was to follow. Investors panicked and sold everything regardless of its quality and the fund suffered during the sell-off.
In the subsequent recovery his experience, both from his time at Jupiter and his previous role at Schroders, came into its own. He is a genuinely contrarian investor who looks at what others are selling and tries to gauge how much bad news is already in the price and what the likelihood of recovery might be. He often reminds me that for stock markets to rise things don't necessarily need to get better – they just need to stop getting worse.
By early 2009 he believed the banking sector had reached this stage and he started buying Barclays at a time when most other investors maintained a strongly negative view. It might not have been a smooth ride, but the decision ultimately proved fruitful. Banks are currently the largest sector exposure in the fund, with Barclays and Lloyds as the top two.
I should mention at this stage that since 2007 Steve Davies has been assisting Mr McVeigh as an analyst on the fund. In January 2013 he was officially named co-manager in recognition of his on-going involvement in selecting stocks. He brings his own skill set to the fund, including from his previous role as a retail analyst. This led the managers to look further at the high street at a time when many investors were writing companies off as consumers battled austerity and cut back spending. The duo believe there can be winners in every sector and found success with Next and Dixons, who bucked the wider trend of poor performance.
In today's market it is not surprising to learn the managers have seen risk aversion and the so-called "flight to safety" in government bonds, gold and Swiss francs as a buying signal for equities. Many private investors have shunned equities and bought into other asset classes over the past ten years while there is also a lot of cash still sat on the side-lines earning negligible returns at best. Even after the strong stock market performance of the past year the managers believe UK equities look reasonable value. They are concentrating on companies with strong franchises such as Bookers, the cash & carry; food group Compass; and financial services firm Experian.
Ian McVeigh and Steve Davies are also making use of their flexibility to invest up to 20 per cent of the portfolio in companies listed overseas, focusing on global winners such as BMW, Apple and Google.
They are not afraid to back their ideas with conviction and this is a concentrated portfolio that bears little resemblance to the benchmark. I like this approach, but it does mean the fund can experience periods of volatility and performance will differ significantly from the benchmark at times. To be a true active manager you have to do something different to peers and Mr McVeigh has always been willing to stand apart from the crowd while sticking to his guns and buying great companies underappreciated by the wider market. I have confidence he and Mr Davies can continue their success over the next ten years.
Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial advisor and stockbroker. For more details about the funds included in this column, visit www.hl.co.uk/independent
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