Investment styles change but you can't beat a good old value investor

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The Independent Online
LAST THURSDAY I was talking on a subject relatively new to me, investment process. Not new in the sense that I was on unfamiliar ground - rather that most times I am asked to address an audience of private investors, they want advice on what to buy. "I want to make money - and I want to make it now", is the usual cry. But you cannot divorce investment from investment process. Aside from anything else, you need to know what the rest of the world is doing.

Passive investment techniques are increasingly popular and relatively easy to understand. Computers tell you what to buy. The most common, index tracking, signals in advance where money is likely to be invested. Active management, on the other hand, is more difficult to second-guess, although broadly the active managers divide into two, growth and value.

We have tended to be value investors in the UK. A tried and tested approach, it served us well - until recently. Growth investment strategies proved their worth in the US and were quickly imported here to devastate the performance of a number of highly regarded fund managers. One, PDFM, made matters worse by nailing its colours to the mast of seeking true value - too early.

But value investors have come into their own again. Recent tables suggest the second quarter has seen value investors leaping ahead of growth-oriented managers and tracker-funds. Not before time, and too early to save the career of Jim Cox of Schroders, who announced his retirement at the ripe old age of 51 this week.

Jim is an industry icon, but he had a tough time running his flagship fund recently. Officially his retirement is due to poor health, but you cannot help wondering whether he became disillusioned with the short-termism of the investment industry and his castigation for having failed to switch investment styles in time to catch the wave of money riding on growth strategies. He managed the trust for a decade and had eight good years and only two bad ones. Unfortunately the two bad ones were the most recent.

Investment styles do move in and out of fashion. "Momentum", a growth style, was very popular. To some, momentum meant finding a bandwagon and leaping on it. But it worked and still does.

A variation cynically the same, but couched less flamboyantly is "theme" investing. Guy Monson of Sarasin adopted this approach with consummate success.

But whatever style you adopt (I like GAARP - Growth At A Reasonable Price), remember that nothing moves in a straight line and yesterday's fashion can unseat today's managers tomorrow.

Value investing is back, and Jim Cox may go, but Schroders remains one of the consistent longer-term performers of this genre, with a new, tough chief investment officer who is a woman, which seems to be a qualification for the job these days.

Brian Tora is chairman of Greig Middleton invest-ment strategy committee

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