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Ups and downs of a high-flyer

Mark Slater, a rising star of the fund management world, has parted company with his biggest client. Can he bounce back?

The world of investment can be a cruel one. That must surely be the view of Mark Slater, the young fund manager who has seen his own stock rise and fall dramatically over the last five years.

The world of investment can be a cruel one. That must surely be the view of Mark Slater, the young fund manager who has seen his own stock rise and fall dramatically over the last five years.

Just four years ago he was being hailed as the rising star of the fund management industry, but this week LeggMason Investors terminated his management contract for the £184m fund bearing his name - LeggMason Slater Growth.

Following the announcement Rebecca Thomas, chief executive of LeggMason Investors, said: "I would like to thank Mark Slater for his help with the trust, which has excellent long-term performance, and his assistance in building the name and track record of Johnson Fry prior to its acquisition by LeggMason last year.

"Mark's other business interests have been growing and he would like to focus on them."

The 30-year-old fund manager and son of the legendary investment guru Jim Slater has had a remarkable investment career, putting into practice some of his father's analysis techniques centred on price to earnings growth. He explained the move saying: "Slater investments is now keen to focus on its high net worth and pension fund clients, as well as a number of new projects. This transition makes perfect sense for unit holders and reflects the fact that both LeggMason and Slater Investments have developed significantly since we started working together four years ago."

A Cambridge graduate, Mark Slater was originally a financial journalist. He only began to manage a tiny pool of money in 1995 in his own fund under the auspices of Old Mutual Slater Growth. However, the key move in his career came when he took his small Slater Growth fund, managed by his own company Slater Investments, to Johnson Fry, which was eager to transform itself from a sponsor of tax sheltering schemes, with a somewhat tarnished image, into a mainstream fund management company.

The snaring of Slater's fund by Johnson Fry was a major coup. Here was a bright young star with the kudos of a famous father and an impressive track record based on a clear investment discipline and a heavy bias to small companies. Johnson Fry was a gifted marketeer and the tiny fund expanded rapidly in size as investors chasing league tables piled in.

However, Johnson Fry now has bigger ambitions and has been quietly building up its own internal fund management team. In a final farewell with its past, the founder chairman Charles Fry was replaced and this year the company sold to US group LeggMason Investors. The Johnson Fry name has now disappeared.

LeggMason argues that the termination of Slater Investments' contract was due to a recent period of poor performance. Certainly the last six months have been terrible and the fund has seen redemptions from investors. In part this is because the fund is heavily weighted to smaller companies and technology stocks but it may also be because Mark Slater has also had to attend to the management of an internet incubator fund.

It would be wrong to damn a manager over such a short time period. In fact, in the twelve months leading up to the end of September the fund actually outperformed the All Share Index by 3 per cent, and over three years Slater Investments generated an impressive 31 per cent out performance of the Index (source: Lipper). Returns have been volatile as one would expect from an aggressive fund with a smaller company bias, but the fund has delivered the goods to long-term investors.

The real reason for the ditching of Slater Investments probably has more to do with the business strategy being implemented by LeggMason, the new masters of the former Johnson Fry. A fund being contracted out to an external fund management company doesn't fit with the group's ambitions to expand and develop its own team, and Mark Slater's other project, the internet incubator, was inevitably taking up some of his time. The recent hiring of John Johnston from Murray Johnstone has provided an ample excuse to take the management of the Slater Growth fund in-house. Johnston has an excellent recent track record with the Murray Smaller Companies fund. Investors in the fund should undoubtedly stay put and wait to see if Mr Johnston can continue to work his magic.

Like his father before him, Mark Slater has experienced the roller-coaster world of being praised as an investment guru. Like Charles Fry, he will no doubt see his name swiftly dropped from the beast he created. Mark Slater is young enough and bright enough to bounce back.

Jason Hollands is the deputy managing director of investment advisers BEST Investment