by Charlie Parker

Legendary small-cap investorGiles Hargreave is hoping risingmarkets will enable him to floathis family’s Blackpool-basedstockbroking firm, HargreaveHale, within two years.

Hargreave runs a range ofunit trusts for MarlboroughFund Managers, including the£165 million MarlboroughSpecial Situations fund, whichhe has run for nine years.

Hargreave said: ‘If we canincrease our funds undermanagement, hire more goodquality people and the marketsstay strong, then we would liketo float in a couple of years.’

However, Hargreave said thatdifficult markets could scupperthe plan, which would see the58-year-old investor accomplishhis ambition of a public issue

before his planned retirementat 65.

The firm, which has beenprivate since his family foundedit in 1897, has the managementcontracts for Hargreave’s fundsand venture captial trusts, aswell as several hundred millionin private client assets. His onlynon-discretionary client is 1970sinvestment guru Jim Slater.

The firm currently has £750million under management.

In the nine years Hargreavehas managed the SpecialSituations fund he hasreturned 837% comparedto a return of 132% fromthe averagemanager in theIMA UK SmallerC o m p a n i e ssector to 30 May(with gross

income reinvested at thepayment date), according toLipper.

During his tenure, he believeshis best performing stock hasbeen engineering firm Charter.He said: ‘We bought Charter at£1.20 and it is now at £10.30.We held it in 2003 and still haveit, our stake has increased invalue from around £250,000 to£2.3 million. It is a classicturnaround company, highly

geared with low margins.’Hargreave’s investment

approach is focused onmaximising winners andminimising losers, which

means he buys into goodstocks even when they have

increased in value, with lessconcern than others for the

multiples on which theytrade.

www.citywire.co.uk 7 June 2007

by Alan O’Sullivan

Premier Asset Management has handed the postof deputy head of multi-manager to a communica-tions manager with no previous fundmanagement experience.

Simon Evan Cook, who joined Premier inAugust of last year on its investment communica-tions team, will work under multi-manager headDavid Hambidge, with Ian Rees as his co-deputy.

Evan Cook takes the post vacated by AidenKearney, who left Premier in March after less thana year in the role to accept the position of co-headof multi-manager at Credit Suisse.

This is not the first time Premier has handedcomplex management positions to relative

unknowns from unrelated departments. One of itsEastern Enterprise fund managers, Feng Sung,who works with CIO Richard Muckart, moved intomanagement from its telesales department, whileAdam Greville-Collins also moved from telesalesinto a manager role on its private client arm.

Managing director for sales and marketing,Simon Weldon, said the company was originallylooking for someone from a communicationsbackground for the post. He said: “No Londonhouse would take someone from its communica-tions department and say, “Do you want to sit yourIMC and get ahead?” We would never say, “Youdidn’t go to LSE or don’t have the right background,therefore you can’t be a fund manager”.’

JPM soft-closesHighbridge fundJP Morgan has closed the JPM

Highbridge Statistical Market

Neutral fund to new investors after

assets under management surged to

$8.7 billion (£4.36 billion) within six

months of launch, writes Dylan Lobo.

The Luxembourg-domiciled Ucits

III Sicav has proved a favourite

among fund of funds managers.

It launched in November 2006 and

is a joint venture between JP Morgan

and US global asset management

firm Highbridge Capital

Management. The fund is predomi-

nantly sold to European investors,

although JP Morgan says around

10% ($870 million) of the

investment has come from the UK.

Schroders head of multi-manager,

Andrew Yeadon, has invested around

£50 million and Insight’s multi-

manager co-head Patrick Armstrong

around £12 million across their

respective multi-manager portfolios.

Yeadon said: ‘Highbridge follows

an absolute return strategy and we

use it as a low volatility alternative to

fixed income in the same risk space.

‘Given its success we welcome the

group’s decision to soft-close the

fund.’

JP Morgan head of UK sales Jasper

Berens, who claimed the fund was

one of the fastest growing funds in

UK retail history, said there were no

immediate plans to hard-close the

fund to existing investors.

He said: ‘We are seeing a lot of

inflows to the fund from UK multi-

managers who are attracted by its

uniqueness, consistent returns, lack

of beta, and low correlation to all

other asset classes.’

BNP Agrinvest will tap biofuel demand – p3 Caution needed over 130/30 launches

– p4

Vinke gets the wink in Europe – p6

Giles Hargreave plans float for family business

Winners of theIMA Team Awardfor Excellence in

Investment Writing2005 and 2006

First for fund manager performance, news and analysisFirst for fund manager performance, news and analysisNº 170

Premier hands rookie deputy multi-manager postFrontRunnerFrontRunner

Hargreave: flotation plans

http://www.citywire.co.uk/redirector/REDIRECT_courier_mandg/http/www.mandg.co.uk/ifa

by Alan O’Sullivan

BNP Paribas will launch aninvestment company calledAgrinvest this month to tap intothe increased global demand forbiofuels and rising consumptionin Asia and emerging Europe.

The closed-ended, Guernsey-listed company will provideinitial net asset value capitalprotection and 130% participa-tion in any positive performanceof the DCI Agriculture BNPParibas Enhanced Index at theend of its six-year life.

The offer price will be 105pper share, with an issue price of100p and an upfront charge of5p to cover expenses.

The index, which is comprisedof 23 global commoditycontracts giving exposure to 13different soft commodities,provides broadly diversifiedexposure to the asset class.

BNP believes the commoditiesmarket is currently benefitingfrom positive economic

conditions. It has strongdemand growth based on arising world population, rapideconomic development anddemand for alternative energysources. Supply constraints dueto a lack of land production,historic underinvestment andpotential water shortages makethe industry attractive onvaluation grounds, it said.

Richard Scott, seniorinvestment manager at IimiaInvestment Management, saidhe is impressed withthe new companybecause it manages tomitigate some of thetraditional weaknessesof commodities funds.

He said: ‘Manycommodity-relatedinvestments just buyshort-term contracts,but this company willbuy those of differentmaturities. One of theproblems with these

funds generally is that you loseout when they reach maturity –the problem of the “roll-upyield” – but BNP is doing somevalue-added work to make surethis is minimised.

‘It is also looking at prices onvarious exchanges, which is notvery common and a good ideaas prices vary considerably.This stems from different localmarket conditions such asharvest, demand and droughts.’

Among the 23 commoditiesthe fund willinvest in, itslargest weightingwill be insoybeans at 17%,followed by cornand wheat, both at12%, and it willhave a 10%weighting inlumber, which isincreasingly beingused as a portfoliodiversifier.

NEWS

BNP Agrinvest will tap biofuel demand

by Matt Goodburn

Dobbies Garden Centres isproving a healthy growth storyfor F&C Asset Managementand Scottish WidowsInvestment Partnership (Swip)as bid speculation continues todrive the stock’s price up.

Citywire sources indicate thatat the end of March F&C owned6.04% of Dobbies, including a3.62% holding in CatherineStanley’s £47 million F&C UKSmaller Companies fund, whileSwip had a 5.6% interest.

Scottish entrepreneur SirTom Hunter has been stronglylinked with a bid for the firmafter he acquired Dobbies’rivals Wyevale Garden Centres

and Blooms of Bressinghamlast year.

The rumours gathered paceafter Hunter increased his stakein Dobbies to over one millionshares in mid-May through hisWest Coast Capital privateequity investment vehicle. Themove lifted his position in thefirm from 7.94% to 10.6%.

The small-cap retailer wastrading at around £5.30 inJanuary 2006 before the bidrumours set in.

Shares shot up by around20% from 10 April 2007 andgot another kick this weekwhen private equity firm ApaxPartners confirmed its interestin the group.

Shares are now trading alittle below the £14 mark andbroker KBC Peel Huntestimates it will get taken out at£15.74.

While Stanley has madesome handsome gains from herholding it could have been evenbetter.

She took some profits on thestock on 22 May before thisweek’s spike, selling 145,000shares at £11.70, which reducedher stake to 2.1%. Thetransaction netted her almost£1.7 million.

Brian Watson’s FramlingtonInnovative Growth Investmenttrust is another big shareholderin Dobbies at 2.5%.

F&C reaps reward as Dobbies’ shares bloom

www.citywire.co.uk 3 7 June 2007

Performance Highlights

Threadneedle puts

healthcare fund to bedThreadneedle Investments is

seeking approval to close its £22

million Global Healthcare fund,

which was launched when equities

bottomed in 2002, writes Dylan

Lobo.

Threadneedle has written to

shareholders and regulators for

approval to close the fund. It

intends to merge the fund’s assets

into its £450 million Threadneedle

Global Select fund, which is run by

Citywire AA-rated Jeremy Podger.

The fund’s manager, Anne-

Marieke Ezendam left the firm on

31 May on the back of the move,

ending her five-year association

with the firm. Steven Thornber will

run the fund on a care and

maintenance basis up to the point

of closure.

A spokesperson for the firm said:

‘Anne-Marieke did a fantastic job

and we wish her well. The fund is

the only one of its type for us at the

moment, it’s a niche sector not

niche geographic and it is not

consistent with our current

strategy.’

When Threadneedle launched

the fund in July 2002 it represented

the firm’s first equity fund launch

for nearly three years. At the time

the firm believed there was

sufficient fear in the market and a

de-rating in the healthcare sector

to provide a window of opportunity.

However, the fund has disap-

pointed on the back of intense

pressure in the biotech and phar-

maceuticals market.

Performance Highlights

NOT A LOT OF PEOPLE KNOW THAT...Julian Lewis, manager of theCavendish Worldwide fund, has aclaim to fame that does not originatefrom his family’s ownership of RiverIsland. The creative soul has penneda children’s book called ‘The MagicLantern of Kimbustan’. The talefeatures the antics of MissMoondance and Aunty Irene. He isnow writing the sequel whichpromises to continue the exploits oftwins Tim and Kelly.

Scott: impressed with BNP

SMITH ON FUNDS

7 June 2007 4 www.citywire.co.uk

UBS looks set to offer a 130/30 fund to the retailmarket to take advantage of Ucits III changes andcapitalise on its manager’s ability to pick shorts aswell as longs.

The new fund, a mirror of its US-based UBS USEquity Alpha fund, will look to generate higheroutperformance from Tom Digenan’s knowledgeand experience of the US equity market.

These new funds combine a relatively modestshort book with a geared traditional longexposure designed to offer standard overallmarket risk (a ‘beta’ of one) with higher stock-specific exposure (alpha). They look set to becomeincreasingly popular with more groups looking atthe possibility of launching them to sit alongsidetheir conventional long-only funds.

Generally, I believe this is a positive step for theretail funds market, as they offer the opportunityfor better returns and broaden the investmentopportunities open to private investors.

However, intermediaries need to be confidentthey understand these funds in general and thespecifics of any individual fund offering beforethey make any positive recommendation, as these130/30 funds carry their own risks.

As investors now have effectively 160%exposure to the manager’s active decisions (130on the long side and 30 on the short portfolio)there is the potential for higher returns withouthigher overall market risk (as the extra 30% longexposure to general market risks should be offsetby the 30% short portfolio).

However, the stock-level risk is notablyhigher and confidence in the manager needs tobe that much higher than for a long-only ‘focus’fund. Advisers also need to be confident thegroup has sufficiently strong risk managementcontrols in place.

There is also a greater risk of short-term luck

UBS hopes the stockpicking skill of Tom Digenan will prevail as itlaunches its 130/30 fund, but advisers should approach with caution

making the fund’s performance look particularly strong – so, intermediaries needto be wary of short periods of apparently strong performance. This is especially anissue if the fund is to carry an asymmetric performance-related fee structure.

There may be questions over the capacity for 130/30 funds, given limits on theability to short stocks, especially since they would compete with the existing(growing) hedge funds business to obtain stock to short.

And how strictly the 130/30 constraint should be adhered to should also beconsidered, as this can crank up the overall portfolio risk (the UBS fund, forexample, can move up to 140/40 should the manager wish to).

Furthermore, intermediaries need to be confident the manager has goodknowledge of the shorting business and genuine abilityto add value from shorting stocks – the ability to identifyovervalued stocks is not sufficient in itself to profit fromshort positions. AXA Framlington’s Nigel Thomas is anexample of a talented ‘traditional’ manager who doubtshis own ability to short stocks efficiently. More gung-homanagers may be more inclined to trust their luck.

In terms of fees, there is the question of why a fundmanager who is able to sell hedge funds on a ‘2 and 20’

structure (with a 2% annual management change and a 20% performance fee onnet new highs) would offer scarce capacity to retail investors through funds withless attractive fee structures. There is a danger managers who cannot sell suchhedge funds will offer 130/30 funds instead, while the best managers will stick withhedge funds.

If a manager has genuine stockpicking skill, then a well-structured and well-supported 130/30 fund can offer retail investors a controlled, purer exposure to thisskill without the fear of investing into a largely unregulated, opaque, offshorehedge fund with potentially higher gearing levels.

But intermediaries need to be confident this is what their clients are really gettingand they are not being ‘fooled by randomness’ into paying higher fees or assumingundesirable risks.

Caution needed over 130/30 launches

Tota

l re

turn

s (%

)

0

3

6

9

12

15

Lipper Global Equity North America (IN)

Russell 1000 TR (IN)UBS US Equity Alpha Fund;A (MF)

Apr-07Mar-07Feb-07Jan-07Dec-06Nov-06Oct-06Sep-06

UBS US Equity Alpha fund has performed well since launch

by David Smithdsmith@citywire.co.uk

I believe 130/30funds are apositive step forthe retail fundsmarket

IMA Team Award for Excellence inInvestment Writing 2005 & 2006

Citywire.co.uk

Don’t take ourword for it -That’s the view of the Investment

Management Association which

gave Citywire the Team Award

for Excellence in Investment

Writing 2005 & 2006.

Online or in print, Citywire brings

you the news and comment you

need to help you do your job.

Citywire Funds Insider™ New Model Adviser™ Fund Manager International™

Citywire Courier www.citywire.co.uk

SECTOR WATCH

Vinke gets the wink in Europe

7 June 2007 6 www.citywire.co.uk

Tota

l re

turn

s (%

)

-10

-5

0

5

10

15

20

25

30

Average Europe Ex UK manager

Willem Vinke

Apr-07Jan-07Oct-06Jul-06Apr-06

Norway is currently providing JOHCM’s Willem Vinke with

strong returns

by Dylan Lobo

JO Hambro Capital Management’s (JOHCM) Willem Vinke took the lead in theEurope excluding UK sector in his first year on his new mandate.

The JOHCM Continental Select Values fund has returned 27.11% against areturn of 15.6% from the average manager in the sector in the 12 months to theend of April (ignoring the effects of initial charges, with gross income reinvestedat the payment date), according to Lipper.

JOHCM launched the fund for Vinke in March last year shortly after the groupclosed two of its existing Dublin-domiciled European funds to new investment.

Vinke’s Continental Select Values fund has collected £13 million in assets sinceits launch and will be capped at €1 billion (£680 million).

The fund is unconstrained and invests in a concentrated portfolio of between30 to 40 stocks. Vinke limits his exposure to a single stock to 10%.

There are four major themes which run through the portfolio: companies withhigh free cashflow equity yield; a high return on capital employed; specialsituations; and undervalued companies trading at a discount of at least 25% totheir intrinsic value.

Vinke is a value investor and has astrong belief that the best returningcompanies tend to be less capitalintensive and, therefore, he looks for‘steady-eddies’, which he takes a two tothree-year view.

Vinke says he is finding ideas rightacross the market spectrum but hisinvestment philosophy has led him totake underweight positions in theutilities, resources and financial sectors. He is currently finding opportunities inNorway due to his positive outlook on the nation’s economy and has positionsin oil services firms.

Vinke aims to fill the portfolio with traditional value stocks which have strongsustainable business models. He says: ‘We are still finding sufficient new oppor-tunities to replace those stocks which have reached fair value, and are confidentwe will continue to find undervalued companies with low capital intensity, highreturn on income and predictable cashflow.’

Dutch information services companies Wolters Kluwer is a stock which fulfilsthis criterion. ‘Its new products are internet-based and the focus is on integratingthem into the business process of its clients. We think growth will accelerate.’

German household products group Henkel is another of Vinke’s core holdings.‘It has a strong market position, is implementing a restructuring programme,and has a rock-solid balance sheet,’ he says.

Vinke has also identified Dutch regional newspaper group Wegener as a firmwhich can open up value through restructuring. He says: ‘The company issued aprofit warning last August, but its latest results show that the restructuring of itscore operations is having a positive effect. We are also currently at the bottomof fair value for the advertising cycle.’

Standard Life Investments’ Stuart Fraser, who is AA-rated by Citywire, tooksecond place in the rankings with a return of 24% on his European EquityGrowth fund, yet he claimed top spot when ranked by risk-adjusted performance

JO Hambro’s Willem Vinke

puts his European success

down to the ‘steady-eddies’

in his Continental Select

Values fund

All graphs sourced to Citywire Financial Publishers www.citywire.co.uk (020 7840 2250)

Rankings based on 1 year MR* in the Europe excluding

UK sector at 5 June 2007

Sector Tracking

Name MR* error Contributing fund

Stuart Fraser 0.812 5.68 SLI European Equity Growth Ret

Willem Vinke 0.73 10.34 JOHCM Continental Select Values

James Buckley 0.58 3.49 Baring European Growth

Dino Fuschillo 0.35 4.61 Martin Currie European A

Nicholas Sheridan 0.27 4.05 Tilney European Growth 1

Managers ranked by their sector-specific manager ratio

* Citywire’s exclusive manager ratio (MR) is a measure of how much value inpercentage terms is added for every unit of risk taken on an annualised basis. An MR of 0.5 is considered good and over 1 excellent.

‘We are still findingsufficient new opportunities to replacethose stocks which havereached fair value’

Willem VinkeJO Hambro Capital Management

SECTOR WATCH

How to read the performance tablesThis column highlights the manager’sperformance in discrete one year timeperiods. The figure takes into accounttheir work on the different funds theyhave run during the period under reviewwithin the IMA sector under analysis.

Discrete quarter-by-quarteranalysis of fund manager

This column identifies the funds currently managed by theindividual manager in the specific sector. Funds have to beactively managed funds available to retail investors to qualifyfor inclusion. This means passive funds and institutionalfunds are excluded from analysis.

www.citywire.co.uk 7 7 June 2007

Meanwhile, NeptuneInvestment Management’sRob Burnett continued hisimpressive run. Burnett,who was the sector’s bestperformer in the previous12 months, claimed fifthplace this time, returning20.3% on his NeptuneEuropean Opportunitiesfund.

Burnett has been cuttingthe fund’s exposure toproperty and industrialssince the turn of the yearto take advantage of thebetter opportunities whichhe perceived to be in the financials, energy and pharmaceuticals sectors.

The New Star European Portfolio, which is a fund of funds, was the worstperformer in the sector. The fund, which was passed on to Clare Bryant fromMark Harris in April, returned 7.55% after posting an impressive return of51.4% in the previous 12 months.

It was also an unspectacular 12 months for AXA Framlington’s MarkHargraves who was the second worst performer with a return of 8.7% on hisEuropean fund.

The following five pages show five discrete years of fund managerperformance data for the Europe excluding UK and North America sectors,broken down quarter-by-quarter in each year. Citywire Courier covers the24 key unit trust sectors regularly.

using Citywire’s manager ratio. The successful identification of European stocks

with improving situations, which have not beenfully priced by their respective markets, was a keydriver of Fraser’s performance.

Meanwhile, Baring Asset Management’s AAA-rated James Buckley built on his growingreputation.

Buckley employs a bottom-up investmentapproach, which allows investors more freedom toparticipate in the peripheral economies in Europe.

He remains bullish on Ireland and points toGreece as an emerging market. He is overweightboth countries as he believes companies in theseeconomies offer the most potential for investmentreturns in Europe. He points out that Irelandcurrently offers a price/earnings (P/E) ratio of 13times for an estimated 12% earnings per share(EPS) growth and Greece has a P/E ratio of 13 timesfor 9% EPS growth.

Dino Fushchillo of Martin Currie is another of thesector’s performers. He put in the fourth bestperformance, returning 20.3% on his Martin CurrieEuropean fund.

Fuschillo stood firm during last year’s bout ofvolatility in markets, refusing to be drawn into anypanic selling. He maintained his high convictionapproach and long-term holdings, such as Spanishconstruction company Acciona, were among themajor contributors to his performance.

Tota

l re

turn

s (%

)

-10

-5

0

5

10

15

20

25

Average Europe Ex UK manager

Stuart Fraser

Apr-07Jan-07Oct-06Jul-06Apr-06

Standard Life Investments’ Stuart Fraser returned

24% in the Europe excluding UK sector

All graphs sourced to Citywire Financial Publishers www.citywire.co.uk (020 7840 2250)