Seven fund superstars to trust with your cash
They're the hottest young investment managers, but what do they offer and why should you seek them out? Rob Griffin investigates
Saturday 22 January 2011
I * the world of fund management, they are the equivalent of Premier League footballers and Hollywood actors: up-and-coming superstars tipped to enjoy glitteringly successful careers in high finance. These fiercely ambitious individuals have caught the eye of industry observers through their determination to deliver decent returns to hard-pressed investors who have seen their portfolios take a battering in recent years.
Passionate and hungry to succeed, these relatively young bucks are being groomed to take over from established funds industry names who have either already retired or, in the cases of Jupiter's Tony Nutt and PSigma's Bill Mott, are into their 50s.
However, it doesn't mean the new breed are wet behind the ears, points out Andy Gadd, head of research at Lighthouse Group. Many of them are already in their 30s and have spent a number of years working as analysts before taking over their funds.
"The most important quality is enthusiasm," says Mr Gadd. "Future star fund managers really enjoy what they are doing and look forward to going to work. They also tend to have gained experience from working their way up through the ranks."
We asked a panel of discretionary investors, financial advisers and multi-managers to name the individuals they believe have the qualities needed to survive and prosper in an increasingly competitive industry.
How they are groomedfor stardom
Within most fund management companies, the favoured way of grooming managers is to recruit them straight from university. This enables them to be grounded in the company's philosophy from the start – and is also cheaper than poaching from rivals.
In the vast majority of cases, their first role will be as an analyst. Once they have shown themselves to be competent researchers, their allotted superior might put them forward to become trainee fund managers.
After passing their qualifications and spending time shadowing an experienced manager, they may be given the reins of their own fund. Generally speaking, it can take between four and seven years to move up from analyst to fund manager.
Pros and cons of backinga young buck
Getting access to the star names of tomorrow can be very rewarding for investors. In the best-case scenarios, investing both their faith and money can result in bumper double-digit returns, with the manager doubling or trebling their fund's value.
But when it goes wrong it can do so in a big way. Some managers fail to live up to their early promise and find that their investment philosophy is undermined by the sudden arrival of a market condition of which they have no prior experience.
This obviously puts a great deal of pressure on the shoulders of investors. Back a future superstar early in their career and your will investment soar – but make the wrong call and your savings could be wiped out virtually overnight.
So how do you know if the performance figures generated by a young manager means that they truly have the potential to make top-drawer returns for many years to come? Has their success been down to a unique talent or a large slice of luck? Well, there are a number of key qualities that potential stars of the future need to demonstrate in order to be considered as contenders, according to Justine Fearns, the investment research manager at AWD Chase de Vere.
"We like to see conviction in the investment principles and processes being used, as well as humility so as to be able to admit when they are wrong," she says. "They also need a willingness to embrace all available resource if they so wish and the ability to communicate, and bring to life, those investment principles, processes and ideas."
Multi-manager Simon Mungall, of Ignis Asset Management, likes to see two key attributes in young managers: market awareness and self awareness. "I like those that exhibit integrity, humility and hunger," he says. "A lack of self-awareness can be the best predictor of future performance issues."
Do not waste too much time looking at a manager's qualifications because although they are obviously important, they can be potentially misleading, says 'Your Money' columnist Mark Dampier, who is head of research at Hargreaves Lansdown.
"The one thing you need as a fund manager is the ability to think laterally and come at a problem from a different angle," he says. "Having the confidence to do that is what makes a really good manager, but the problem when you are younger is that you are too scared of making the wrong call and losing your job."
While lack of experience is the main negative when it comes to choosing a younger manager over someone with a few more grey hairs, the past few years have been a real education in this respect, believes Darius McDermott, the managing director of Chelsea Financial Services.
"Most youngish managers will have worked through 2008-9, which is probably the most tumultuous time in most people's careers," he explains. "Those that have come through this period will have probably picked up more experience than they would have done in a lifetime of investing."
So what conclusions should be drawn? There is little doubt that identifying a potentially top-drawer manager early in their career can be rewarding – but this is obviously difficult, even for experienced investment professionals. However, when conditions are really challenging, it can be comforting to have someone at the helm who has experienced similar environments in the past. A potential solution is to have a blend, suggests Simon Mungall, at Ignis.
"I passionately believe that diversification by experience and outlook can be very helpful," he says. "That is why I spend a lot of time talking to people in person and meeting them in their own environments to understand what makes them tick."
fantastic fund managers
Invesco Perpetual UK Aggressive Fund
CV: Anness started his investment career at Invesco Perpetual in 2002, providing equity research for Neil Woodford and the UK team. He became a fully-fledged fund manager in September 2004, managing the UK portion of a variety of pan-European mandates.
Our panel says: "His interpretation of the bigger picture helps with stock positioning and his tenure has delivered strong returns with, on average, less volatility than the peer group."
Standard Life Investments UK Equity Income Unconstrained Fund
CV: Thomas joined Standard Life Investments in 2002 and is currently an investment director on the UK desk. His responsibilities include managing the Income Unconstrained Fund, managing two institutional funds (combined market value of £400m) and analysing the financial services sector.
Our panel says: "He is dead keen, has been putting in some really good numbers and shows real promise."
Rathbone Global Opportunities Fund
CV: Thomson joined Rathbone in October 2000 and has been involved in management of the Rathbone Global Opportunities Fund since its inception in 2001. He gradually took over the day-to-day management of the portfolio and was named sole manager in July 2005.
Our panel says: "He has been at the fund a good while and has an excellent track record."
Melchior Selected Trust: European Absolute Return Fund
CV: Charlton was a Goldman Sachs equities trader before moving to GLG Partners to co-run its European Opportunity fund. In 2006, he joined Dalton Strategic Partnership to launch the Melchior European Fund. He also looks after the Melchior Selected Trust: European Absolute Return Fund.
Our panel says: "It has been a really hard sector but he has done well. He is amazingly dedicated and wants to make money for his unit holders."
M&G Global Dividend Fund
CV: Stuart joined M&G in January 2004 as an analyst on its global equities team, responsible for analysing companies across the world. In March 2007, he was made deputy fund manager of the M&G American Fund and in July 2008 he was appointed manager of the M&G Global Dividend Fund on its launch.
Our panel says: "The fund has achieved excellent numbers and Rhodes works out of the global team that consists of a number of top managers."
Gartmore China Opportunities Fund
CV: Joined Gartmore in September 2001 as a researcher in the materials sector. In 2003, he assumed the role of investment manager, supporting Gartmore's China Opportunities Fund. He was appointed manager of this fund in June 2006.
Our panel says: "He has a real passion and understanding for his region which, combined with the disciplined investment approach and his integration into a well-regarded emerging markets team, has translated into strong returns."
Coupland Cardiff Asia Alpha Fund
CV: Despite still being in his mid-30s, Dutton actually boasts 14 years of experience in Asian equities, having begun his career at HSBC Securities on the graduate training programme. Since 1997, he has covered every sector in Asia and every market cap. He joined Coupland Cardiff Asset Management in 2005.
Our panel says: "He is a good guy and although he has a fairly small fund, his performance has been fantastic and he's an interesting idea."
Moore's merry-go-round with the Standard Life fund
The Analyst, page 59
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