Personal finance: pounds 50m says this is the manager to watch

THE JONATHAN DAVIS COLUMN
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While history shows it is uncommonly difficult as a professional investor to beat the market averages over time, it can be done. Every once in a while it is good to see a new and exciting talent arrive on the investment management scene who threatens to do what scores of other professionals have failed to do before - and show a clean pair of heels to his rivals through consistently superior stockpicking. This week investors have bet pounds 50m that they have found just such a new and rare talent.

The story behind the rise to prominence of Jayesh Manek, the man in question, would be hard to beat if it were served up as pulp fiction. He and his family arrived in England as refugees from Uganda in 1971. They started a small chain of pharmacies in west London and through hard work built it up into a prosperous business, which they still own. In his spare time Mr Manek started playing the stock market, beginning with a handful of privatisation issues before moving on to try his hand in other sectors of the market.

It was not long before he was hooked. Calm, thorough and thoughtful, he approached the subject as one suspects he does everything in life, reading all the books he could lay his hands on and gradually formulating a method for picking small growth stocks. His private portfolios did well - and then in 1994 he decided to enter a Fantasy Fund Manager competition run by a national Sunday newspaper.

As is his way, Manek took the game seriously, made a series of multiple entries, and won the competition by a mile, turning his notional starting stake of pounds 10m into pounds 500m within six months. The following year he repeated his victory when the competition was run a second time. In all he ended up winning nearly a quarter of a million pounds in prize money.

Of course that was only a game and one which required taking an unnaturally large degree of risk to win, given the short time span. But then in 1995 Mr Manek was offered the chance by the legendary investor Sir John Templeton to look after some real money - pounds 5m of his private funds. Earlier this year, Sir John gave him another pounds 5m to look after. And so Mr Manek, as delightful and charming a fellow as you could wish to meet, found himself a professional fund manager, running both his own and Sir John's portfolios from the offices above the family pharmacy, Dallas Chemists in Ruislip High Street.

Now he has gone the logical final step and started the Manek Growth Fund, a unit trust which follows the stockpicking methods he has honed over the years. When applications closed last week, he had attracted pounds 50m of new money to add to the pounds 14.5m of Templeton money which will be rolled into the new fund and invested alongside it.

It is a remarkable sum to raise for someone who has never worked in the City and whose training was a pharmacy, not finance. For the time being, Manek will continue to plot his investment strategy from above the shop in Ruislip High Street.

How well will he do? Well, having spent some hours with Mr Manek above the pharmacy this week, I certainly would not bet against his building a formidable track record over time. Of course, running a unit trust with pounds 65m in it is, after all, not as easy as running a couple of private portfolios - and doing so in the spotlight of daily public monitoring is no picnic either. You can be sure that plenty of his competitors will be gleefully watching for any sign of his seeming to slip up. Add to that the fact that he is starting his fund in the mature phase of a long bull market, and the odds against success might seem rather high.

But Manek is unflustered; he is in the game for medium to long-term returns and argues convincingly that his style of stockpicking will continue to outperform the market even when the current bull run comes to an end. For the record, he says that both the New York and London markets (and especially the former) are well above their long-run historical trend line: he calculates that the Footsie index needs to fall back to around the 4,200 - 4,300 level to get back on trend, and Wall Street could go all the way from 8,000 to 5,000 on the same basis.

But, like all the great stockpickers, Manek is not overly worried by the state of the market as a whole. He thinks most private investors spend far too much time fretting over the level of the market. What matters more is how well the few companies which you have picked are doing.

If the companies continue to deliver what they have promised, and the original decision to buy was right, over time the shares will continue to outperform the market.

Picking a good business, he insists, is the key to finding long-term winners - and the simpler the business, the more focused the management, the better he likes it.

Looking through the portfolio that Manek has been running for Sir John Templeton is interesting. It is highly concentrated, with the 10 largest holdings accounting for 90 per cent of the fund's value. The companies Manek favours are all relatively small growth companies, either turnaround situations (Anite, formerly Cray Electronics, is one) or pure growth stocks (such as JJB Sports, and the computer company Parity).

Intriguingly, the list contains several of the stocks that Jim Slater has also been finding with his price-earnings/growth rate methods, although the two men's investment styles are different in other respects.

Like Slater, Manek is keen on retail and leisure stocks and also service companies in the computer field. One of his general themes is that there is plenty of mileage left in buying companies which are now benefiting from the application of technology.

Banks are a good example, Boots the Chemist another - the latter, of course, from the business Manek himself knows best. He says the recent introduction of a distinct IT sector in the Stock Exchange classification system can only highlight the attraction of shares of this type.

Of course, now that he has so much more money to play with, Manek knows that he is going to have to move up into the ranks of mid-sized and Footsie stocks to fill out his portfolio. Although his fund will remain weighted in favour of smaller growth stocks, he is confident that he can find shares which can deliver strong performances in the upper reaches of the market as well.

Manek hopes to have completed the investment of his pool of money in fairly short order. He is a genuinely impressive individual and refreshingly open about his methods and ambitions. Definitely one to watch over the coming months and years.

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