Tony Dye: Controversial fund manager
Monday 17 March 2008
Tony Dye was one of Britain's best known fund managers, becoming a household name in the late 1990s due to his controversial opinions about the outlook for global stock markets. At a time when markets were soaring, Dye insisted they were overvalued and on the verge of a crash – a view which put him at odds with most other investors at the time and earned him the nickname "Dr Doom".
As early as 1995, as the FTSE 100 was approaching 4,000 points, Dye began to make the case that markets were too expensive. At the time, he was the chief investment officer for Phillips & Drew, one of Britain's biggest asset management firms, and by 1996 he had begun to move large sums of clients' money out of equities and into cash.
In the years that followed, however, stock markets continued to soar, driven by the technology boom. But Dye stuck to his guns, avoiding the high-growth, high-risk internet stocks, maintaining large positions in cash, and consequently ensuring that Phillips & Drew's funds significantly underperformed their rivals. By 1999, the firm was ranked 66th out of 67 for performance amongst Britain's institutional fund managers, and was haemorrhaging clients – and in February the following year, just weeks after the FTSE had broken through 7,000 points for the first time, Dye was sacked.
Days later, his prophesy finally came true. Markets collapsed, and settled into a three year slump, which saw more than 50 per cent wiped off the value of global stock markets.
A year later, Dye went onto launch his own fund management boutique, Dye Asset Management, in partnership with the former Foreign & Colonial pension fund manager Ed Knox. The new firm's main offering was a hedge fund called Contra, which proved popular with investors, and amassed some $400m (£197m) of assets. However, by the time Dye stood down from his day-to-day management duties a year ago, due to ill-health, the fund had dwindled to just $70m.
Dye did not always seem destined for fund management. After growing up in Sheffield, and studying economics at the London School of Economics, he started his career at an engineering company. He soon changed tack, and headed for the City, joining a small life insurer, London Life, in the early 1970s, where he was part of the bond fund team.
Even then, he had strong views on the equity markets, certain that stocks were undervalued, and persuaded his boss to let him try his hand at running equity portfolios. From there, he moved to Colonial Mutual Life where, at the age of just 34, he was appointed head of investments.
A year later, however, in 1983, he moved to Phillips & Drew, now owned by UBS, as a pension fund manager – the start of a 17-year long stint with the firm. In his early years, he quickly built up a reputation as an excellent fund manager, pushing Phillips & Drew's funds to the top of the performance tables, and correctly anticipating several serious market corrections.
He was one of the first UK managers to move out of Japanese equities in the mid 1980s, for example, a year before severe problems with the economy began to come to light. By the late 1980s, the Japanese market was in free-fall, and almost 20 years on has yet to recover. His prophetic opinions and strong fund performance did not go unnoticed, and by 1985 he was chief investment officer of P&D. At the firm's peak in the mid 1990s, Dye was in charge of more than £60bn of assets.
Although his last years at P&D were mired in controversy, Dye's predictions of a market crash nearly came true much sooner – as first the Asian tigers crisis in 1997, and then the collapse of the Long Term Capital Management hedge fund in 1998, rocked the world's markets. But on both occasions, central banks slashed interest rates and delayed the inevitable, leaving Dye to wait until 2000 for his vindication.
After leaving P&D, Dye continued to court controversy. Towards the end of 2002, he wrote a letter to the Financial Times predicting an imminent housing crash in the UK, on a similar scale to the house-price slump of the early 1990s. He predicted that at least 30 per cent would be wiped off the value of the average residential property – a prophecy that he never saw come to pass. However, he may yet be proved right on that one too.
Anthony Dye, fund manager: born 5 February 1948; chief investment officer, Philips & Drew Fund Managers 1985-2000; director, Dye Asset Management 2001-07; married (one son, one daughter); died 10 March 2008.
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