Investment: The Fund Manager: Team approach was ahead of the trend

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The Independent Online
IN COMMON with most graduates, fund management was not Margaret McLaren's first thought as a possible career. "When I left university in 1983 with a degree in mathematical sciences, I thought I wanted to be an actuary," she says. I started my actuarial career at Scottish Mutual, and my first department was investment management. I quickly realised this was the most interesting area of the business."

She stayed until the beginning of 1987, when she moved to FS Assurance. FS was acquired by Britannia Asset Management (the fund management subsidiary of the Britannia Building Society) in 1989 and the group is completing a merger with Britannic Assurance.

"When I joined in 1987 we managed a total of pounds 200m," she says. "After the acquisition by Britannic is finalised, we will manage pounds 20bn and it has been very exciting for me to have been part of that growth. When I joined, I was the sixth person on the investment management team. Now we have 40."

For much of her time at Britannia, Ms McLaren has been a specialist in the US market. "When I joined FS, I went straight into the US department, which was relatively new at the time. Up to then, the group had been predominantly in UK equities and fixed interest investments. We launched our American Growth fund on 1 April 1987. We had a very good time for six months - until the October market crash." Fortunately for herself, Ms McLaren was moving house at the time of the market dive. "So I had taken all of my money out of the market to fund the move."

She continued to lead the US team at Britannia until the beginning of this year, when she took over responsibility for UK and European investments. "This was one of the first moves towards a pan-European approach, although the UK and European teams are still separate specialist groups."

This structure is at the heart of Britannia Asset Management's approach to running investments. It has teams of specialists across all its funds. A "fund co-ordinator"brings together the work of each of the sector specialists within the group, rather than each trust having a designated fund manager.

Ms McLaren's role is to be the co-ordinator of the co-ordinators of the UK and European funds. "The biggest part of our success is the fact that we operate a team approach and the team culture is important. The idea is trendy now, but five or six years ago it was unusual. Most fund management houses wanted to focus attention on the individual fund manager. Here we are very much a team and everybody in the team contributes to performance. In general, no one person is responsible for making all the decisions and the portfolio co-ordinator is there to make sure the portfolios are broadly in line with our set benchmarks."

These teams are typically based on individual markets and regions and on specific types of companies, contributing investment ideas to all relevant funds. For example, one of the more prominent unit trusts under Ms McLaren's UK oversight is the Britannia Higher Yield Fund.

In line with the criteria for inclusion in the UK Equity Income sector, its investment policy states that it has to keep a minimum of 80 per cent of its portfolio in UK equities. But the fund is unusual in that it invests up to 10 per cent in fixed interest securities.

Margaret McLaren says: "Investing in fixed interest to meet the yield target means we can focus the remainder on growth stocks to improve the overall return. This way we can be in growth stocks, such as telecoms and pharmaceuticals which don't pay such a high dividend, and which a lot of the competition will have difficulty investing in."

The portfolio of the fund underlines this approach, with the five largest holdings (nearly 26 per cent of the fund) being BP Amoco (7 per cent), British Telecom (6.1), Glaxo Wellcome (4.5), Vodafone Airtouch (4.3) and SmithKline Beecham (4).

She says: "The UK FTSE large cap team, eight people in all, contributes most to the Higher Yield Fund, but there are also three more in the small- cap team giving their input, and each of these individuals is a sector specialist."

The trust's holdings are also influenced by the investment management departments' overall view of markets and sectors. As Ms McLaren explains: "Britannia also adopts this approach to global sectors and we have picked five growth sectors we think are truly global - oil, telecoms, pharmaceuticals, technology and chemicals."

This strategy enhances the long- term total return of the fund but it is not foolproof. For example, it had no exposure to IT hardware stocks during their recent extreme outperformance and, as Ms McLaren points out, large caps are not always where the greatest growth is to be found. "We have about 8 per cent in fixed interest and that is all in corporate bonds. The fund had a rough time for the first six months of the year, when large- cap growth stocks fell out of favour but it has come back very strongly in the second half."

Fundamental Facts

Fund Manager: Margaret McLaren;

Age: 37

Fund: Britannia Higher Yield

Size of Fund: pounds 326.30 million, launched December 1986

Role: Head of UK and European team since January 1999

Current Yield: 2.69%

Initial Charge: 5.25% (Investors may be able to buy at significantly lower cost via a discount broker)

Annual Charge: 1.50%

Current Bid/Offer Spread: 5.25%

Minimum Investment: pounds 500 (subsequently pounds 250)

Minimum Monthly Savings: pounds 30

Standard & Poor's Micropal Rating:

(maximum *****): ***

Fund performance

(to 8 November 1999) in percentages

One Year 8.53

Two Years 26.05

Three Years 50.23

Five Years 114.60

Seven Years 206.81

Ten Years 317.70

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