Wealth of young talent: Up-and-coming managers are catching the eye of investment houses
Saturday 14 November 2009
Investment houses are grooming the next generation of fund managers that they hope will deliver bumper double-digit returns over the next few years and help to restore the public's faith in the industry. Succession planning has always been seen as the key to success in a ferociously competitive environment, and this is growing in importance, with a number of current star managers now approaching their mid-fifties.
But the stock market turbulence over the past couple of years has also highlighted the potential dangers of over-promoting young managers who simply do not have the experience to cope in different market conditions.
That is why the potential stars of the future are now more likely to be in their thirties and either already running their own portfolios or waiting patiently to be given the reins of a flagship fund when a vacancy arises.
According to Darius McDermott, managing director of Chelsea Financial Services, the more bear markets you go through, the more you want older fund managers who have been through the good and bad times. "I am not saying that you cannot have young fund managers that do well, but you cannot replace experience," he says. "Some managers are thought of as top dogs but they would not know what to do in a negative market."
So who are these youngish bucks, and are they really capable of outperforming their more established rivals? We quizzed a string of leading financial advisers and industry observers to discover who they tip for the top.
Fund: Gartmore China Opportunities Fund
Charlie joined Gartmore in September 2001 with responsibility for research into the materials sector, before becoming an investment manager and playing a supporting role on the Gartmore China Opportunities fund two years later. He subsequently spent six months working for Gartmore in Hong Kong focusing on opportunities in the Chinese market, and was appointed manager of the fund in June 2006.
Darius McDermott, managing director of Chelsea Financial Services, says Charlie has delivered decent returns. "China is a particular special situation, but he picked up the mantle from the previous manager and has just kept going. He had a difficult time in the negative markets but has since picked up strongly."
Fund: Jupiter Strategic Bond Fund
Ariel arrived at Jupiter Asset Management 12 years ago as an assistant fund manager in the fixed interest team, becoming a fund manager two years later. As well as having run the Jupiter Strategic Bond fund since its launch in June 2008, he also looks after the fixed interest component of the Jupiter High Income fund and Jupiter Monthly Income fund.
Mark Dampier, head of research at Hargreaves Lansdown, says you don't normally know how good a manager is until a few years down the line, but Ariel Bezalel has caught his eye. "Each time I talk to him I am more impressed," he says. "He's quite young but his knowledge and understanding of the market is so good."
Company: JO Hambro
Fund: JOHCM UK Dynamic Fund
Alex Savvides has 13 years' industry experience and joined JOHCM in March 2003, where he runs the UK Dynamic fund and works alongside Mark Costar on the JOHCM UK Growth Fund. Prior to joining JOHCM, he spent seven years in sales, trading and research roles at various broking firms, focusing on UK companies.
Geoff Penrice, a financial adviser at Honister Partners, is impressed. "He is an excellent stock analyst, with a detailed knowledge of industry and stock price drivers," he says. "When combined with good portfolio construction this will lead to long-term outperformance."
Fund: Threadneedle UK Mid 250 Fund
It has been 10 years since Simon Haines joined Threadneedle as a trainee UK fund manager, who achieved his goal in January 2005. As well as managing the Threadneedle UK Mid 250 Fund, the Threadneedle UK Accelerando Fund, the Threadneedle Pensions UK Equity High Alpha Fund, and a UK Equity High Alpha segregated mandate, he also has research responsibility for the Construction & Materials and General Financial sectors.
Andy Gadd, head of research at Lighthouse Group, has been watching Haines for a couple of years and points out that his long-term performance in the mid-cap sector has been impressive. "He takes a high conviction approach and now has a reasonable track record to analyse," he says. "I continue to feel that Haines is an excellent fund manager and this is backed up by the numbers."
Fund: BlackRock European Dynamic Fund
Alister Hibbert is a member of BlackRock's European Equity Style Diversified team and responsible for managing Continental European products. He joined the company in 2008 from Scottish Widows Investment Partnership (SWIP), where he was an Investment Director, responsible for managing European portfolios. Prior to joining SWIP in 2005, he was a European equity portfolio manager at Oeschle International.
Geoff Penrice at Honister Partners says Hibbert has demonstrated "an exceptional level of understanding" of both macro and stock price drivers, as well as boasting a very detailed knowledge of portfolio construction. "He is an impressive individual with lots of resources at his disposal," he adds. "His fund should be one to follow. "
Company: Close Asset Management
Fund: Close Special Situations and Close Beacon Investment
Deryck graduated from Cambridge University in 1994 and is a chartered accountant, having spent over six years working at Deloitte & Touche in London and New York.
He has been a UK equity analyst since joining Govett Investments in February 2001 and is a CFA Charterholder. He joined Close in March 2005 and was appointed manager of Close Special Situations and Close Beacon Investment Fund on 1 August 2008.
Rebecca O'Keeffe, head of investment products at Interactive Investor, is monitoring his progress. "Considering that this investment is in UK smaller companies, rather than China or other Global Emerging Markets, it reinforces his stock-picking credentials," she says.
Position: Head of European Equities and investment director
Rob joined Neptune as an investment analyst in 2002 and became manager of Neptune European Opportunities, one of the company's flagship funds, three years later. He has since become investment director and head of European equities, and also manages the Neptune Max Alpha fund and the offshore Neptune European Growth.
Andy Gadd at Lighthouse Group is keen to highlight Rob's strong performance. "This can mainly be credited to a solid top-down assessment of both the economy and equity markets and a flexible investment approach by the manager which has produced strong returns across various market cycles."
Meanwhile, Mark Dampier at Hargreaves Lansdown agrees that Rob is doing well and points out that he is in a group surrounded by a lot of experienced people.
Youth or experience?
These relatively fresh-faced managers may have risen quickly through the ranks but should you be risking your money on them? How do you know if they truly have what it takes or whether they are more over-confident than competent?
After all, it's a thin dividing line. Back a future superstar early in their careers and you'll be able to sit back and watch your investment soar. Make the wrong call and your savings could be wiped out virtually overnight.
Geoff Penrice, a financial adviser with Bates Investment Services, says: "The positives are that they are often highly motivated, with high energy levels, and even more importantly, tend to have new ideas. However, they may not have the experience of certain market conditions."
However, there's a difference between being young and being inexperienced, points out Andy Gadd, head of research at Lighthouse Group. Just because they don't have any grey hairs doesn't mean they lack the requisite skills.
"Many up and coming fund manager stars of the future will have followed an established career path," he says. "They will have started out as part of a research department, then an assistant manager before ultimately becoming a fund manager."
The perfect young fund manager
* Experience as an analyst
* Very competitive
* The backing of a major fund management group
* A particular investment style
*No other commitments – so they can focus purely on delivering returns
* A hunger to learn
* A willingness to share ideas with more experienced colleagues
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