The Analyst: London doesn't have all the top teams
Saturday 15 September 2007
If your image of an investment manager is a fellow in the City of London wearing a public-school tie and bowler hat and carrying a brolly, then think again. These days, quite a few of them dress casually. And some of the best are not even based in the capital.
What matters is that an investment manager focuses on what is really important: successfully managing money for investors. If anything is allowed to get in the way of that – for example, the hustle and bustle and hassle of central London – then it is sacrificed.
The superb investment companies located outside London include Invesco Perpetual, for whom the highly regarded Neil Woodford manages more than £16bn from their Henley-on-Thames offices. Another is the exceptional team of UK specialists working for Rensburg, based in Leeds, West Yorkshire.
Rensburg does not advertise a great deal so it might be an unfamiliar name, but the firm has just as much knowledge and talent as their better-known peers. The UK team comprises Mark Hall, Paul Spencer, Stuart Sharp and Colin Morton. I have often said that operating small teams with short lines of communication is the best way to manage money. I was therefore intrigued when Rensburg launched a new fund last year – the Rensburg UK Managers' Focus Trust – that pools the knowledge of these four quality managers.
Each manager is responsible for a quarter of the portfolio and is tasked with selecting only their best ideas. The portfolio is designed to be well diversified across the market because each manager is an expert in a different area.
Colin Morton and Stuart Sharp invest in large and small companies respectively, while Paul Spencer specialises in the medium-sized firms of the FTSE 250 Index. The final component of the fund is run by Mark Hall, who is free to choose any stock from the UK market; he is ideally suited to this role as he has one of the best track records of any manager in the country.
This structure results in a focused portfolio of around 50 stocks. The managers work closely together to help keep the portfolio balanced. For example, if they were all extremely bullish on mining stocks, they would decide how to divide up the opportunities between them. This helps to ensure that the portfolio doesn't become too biased towards a narrow range of sectors, which would only add to the risk and volatility of the fund.
The largest sector positions at present are 12.21 per cent in support services, 8 per cent in real estate and 6.36 per cent in air and defence. In terms of individual stocks, the biggest holdings are Cobham (defence) at just under 3 per cent, Southern Cross (care homes) at 2.7 per cent and GlaxoSmithKline (pharmaceuticals) at 2.6 per cent. You can see, therefore, that no single stock or sector will have a massive impact on the performance of the fund.
The structure of the fund means that it is likely to have a slight natural bias towards small and medium-sized companies. The reason for this is that, because of the sheer volume of companies in those areas, plus the fact that they get less coverage from analysts, Mark Hall is more likely to be able to find anomalies and undervalued companies.
In my opinion, Stuart Sharp has done a particularly good job during the fund's first year; his stock ideas have really helped to boost the fund's performance. He doesn't pay much attention to market timing (indeed, none of the four managers does), but he did start to sell many of his most successful holdings in July when they reached his price targets. This meant that by the end of July his part of the portfolio had almost 17 per cent in cash (the fund as a whole had 11 per cent in cash), which provided some support as markets fell during August.
In conclusion, what you get with this fund is an extremely talented team of managers who have bags of common sense, who will meet any problems head on, and will come to sensible decisions. The managers have an incentive to perform because they have their own money in the fund, and also because they are dedicated professionals who want to do the best job possible for their clients.
I fully expect the team and the fund to go from strength to strength. If you are looking for a high quality UK fund that invests across the market, then this is one fund that merits close attention.
Mark Dampier is the head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information about the funds included in this column, visit www.h-l.co.uk/independent
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