star fund manager analysis
TRANSCRIPT
Star Fund Managers
Life beyond the stars 16 July 2014
2
Summary.…
Funds run by ‘star managers’ typically continue out-performing after the star departs
A firm’s culture is critical – key attributes sustain post-handover, e.g.
− ‘Star managers are not islands – they are supported by a team of analysts
originating ideas and technical valuations
− Such teams often remain in place after a star’s departure
− Firms take trouble to mentor younger talent and create tomorrow’s stars
Firms also have other attributes which sustain after a manager’s exit:-
− Investment philosophy
− Process
− Global research and ideas
Where entire investment team’s do leave, firms have every incentive to replace with top
manager talent
3
New managers typically continue their predecessor's out-performance ….
Fund Star Manager
Start Month
End Month
% pa growth
Vs benchmark
New Manager
% pa growth
Vs benchmark
Fidelity Special Situations Anthony Bolton Dec-85 * Jan-08 5.3% Sanjeev Shah & Alex Wright 1.9%
Schroder UK Alpha Plus Richard Buxton June-02 June-13 4.1% Philip Matthews 2.8%
Liontrust UK Growth Jeremy Lang Apr-96 Mar-09 1.8% Anthony Cross / Julian Fosh 2.6%
Henderson EU Select Opportunities Roger Guy Dec-93 Jan-10 3.8% John Bennett 2.2%
Schroder European Opportunities Chris Rice Dec-02 June-13 0.9% Steve Cordell 5.3%
Jupiter European Special Situations Leon Howard-Spink Apr-01 July-05 6.4% Cedric de Fonclare 1.6%
Axa Framlington UK Smaller Companies Rodger Whiteoak July-01 Feb-08 8.2% Henry Lowson 2.3%
Schroder Tokyo Dennis Clough June-89 Mar-04 7.0% Andrew Rose 0.8%
Schroder Income Nick Purves Oct-03 May-10 2.2% Nick Kirrage 1.8%
Jupiter Financial Opportunities Phillip Gibbs June-97 Oct-11 12.4% Robert Mumby -2.4%
Fidelity European Tim McCarron Jan-03 Sept-09 0.8% Samuel Morse -0.6%
* The fund started in 1979, but Aegon has data since 1985
4
Fidelity Special Sits has out-performed by 2% pa since Bolton departed .…
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Anthony Bolton FTSE All-Share TR
-40
-20
0
20
40
60
80
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
Post Bolton era (Sanjeev Shah & Alex Wright) FTSE All-Share TR
Fidelity Special Sits 1985-2007 Fidelity Special Sits 2007-14
Consistent application of contrarian / value approach over 1979-2014, e.g.
− Courage to not join the dot com party in 1999-2000
− Bold positions built in financial sector over 2010-11
− backing domestic recovery stocks over 2011-13, e.g. house builder Redrow, when forecasters predicted poor economic recovery in the UK
Active mentoring of more junior managers by Anthony Bolton
Patience to accept periods of under-performance, e.g. 1998-99, 2011
Source:- Lipper
5
Schroder UK Alpha Plus:- out performance since Buxton departed .…
-50
0
50
100
150
200
250
300
Richard Buxton FTSE All-Share TR
-2
0
2
4
6
8
10
12
14
16
18
Post Buxton era (Philip Matthews) FTSE All-Share TR
Schroder UK Alpha Plus 2002-13 Schroder UK Alpha Plus 2013-14
When Buxton left, Schroder replaced one proven fund manager with another:- Philip Matthews joined from Jupiter
High conviction fund with ~ 55 holdings
Decisive action taken over 2013-14 to drive performance through the market cycle:-
− Reduced aggregate domestic cyclical exposure of the fund in 2013
− Raised holdings of mega caps during 2013-14, e.g. Shell, Glaxo, BP, HSBC
Source:- Lipper
-2.0
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14
Schroder UK Alpha Plus Old Mutual UK Alpha
6
…. and broadly in line with Buxton’s new OMGI fund
Schroder UK Alpha Plus & Old Mutual UK Alpha 2013-14
Source:- Lipper
7
Liontrust UK Growth:- investors would have done well to stay put after Jeremy Lang departed .…
0
50
100
150
200
250
300
Jeremy Lang FTSE All-Share TR
0
20
40
60
80
100
120
140
160
Anthony Cross / Julian Fosh FTSE All-Share TR
Liontrust UK Growth 1996-2009 Liontrust UK Growth 2009-14
Liontrust was eager to replace star manager Jeremy Lang with top talent when he left in 2009:-
− Anthony Cross had been at Liontrust since 1997 developing a distinct investment process
− Anthony and Julian XXX have over 50 years’ combined investment experience – 40 years when they took over the fund
They have applied the ‘Economic Advantage’ investment process, designed to identify businesses with high barriers to competition:- intellectual property,
strong distribution channels, or high levels of recurring revenue (70%+)
Intellectual conviction enabled them to spot exciting companies with these attributes before the general market got excited, e.g. Rotork, Rightmove, Compass
Source:- Lipper
8
Henderson EU Select Opportunities:- no need to panic when Roger Guy departed ….
0
100
200
300
400
500
600
700
Roger Guy FTSE World Europe ex UK TR GBP
-20
-10
0
10
20
30
40
50
60
70
John Bennett FTSE World Europe ex UK TR GBP
Henderson European Select Opportunities 1993-2009 Henderson European Select Opportunities 2009-14
Source:- Lipper
9
Schroder European Opportunities .…
-20
0
20
40
60
80
100
120
140
160
180
200
220
Chris Rice FTSE World Europe ex UK TR GBP
-5
0
5
10
15
20
25
Steve Cordell FTSE World Europe ex UK TR GBP
Schroder European Opportunities 2002-12 Schroder European Opportunities 2002-12
Source:- Lipper
10
Jupiter European Special Situations .…
-50
-40
-30
-20
-10
0
10
20
30
40
50
Leon Howard-Spink FTSE World Europe ex UK TR GBP
-20
0
20
40
60
80
100
120
140
Cedric de Fonclare FTSE World Europe ex UK TR GBP
Jupiter European Special Situations 2001-05 Jupiter European Special Situations 2005-14
Source:- Lipper
11
Axa Framlington UK Smaller Companies .…
-50
0
50
100
150
200
Rodger Whiteoak FTSE Small Cap (X It) TR
-60
-40
-20
0
20
40
60
80
100
120
Henry Lowson & Chris St John FTSE Small Cap (X It) TR
Axa Framlington UK Smaller Companies 2001-08 Axa Framlington UK Smaller Companies 2008-14
Source:- Lipper
12
Schroder Tokyo .…
-60
-40
-20
0
20
40
60
80
100
120
Dennis Clough Topix TR
-20
-10
0
10
20
30
40
50
60
70
80
Andrew Rose Topix TR
Schroder Tokyo 1989-2004 Schroder Tokyo 2004-14
Source:- Lipper
13
Schroder Income .…
0
10
20
30
40
50
60
70
80
90
100
110
Nick Purves / Ian Lance FTSE All-Share TR
-10
0
10
20
30
40
50
60
70
Nick Kirrage FTSE All-Share TR
Schroder Income 2003-10 Schroder Income 2010-14
Source:- Lipper
14
of course
not all funds continue to out-perform ….
15
Fidelity European .…
-20
0
20
40
60
80
100
120
140
160
180
200
Tim McCarron MSCI Europe ex UK TR USD
-20
-10
0
10
20
30
40
50
Samual Morse MSCI Europe ex UK TR USD
Fidelity European 2003-09 Fidelity European 2009-14
Source:- Lipper
16
Jupiter Financial Opportunities .…
-100
0
100
200
300
400
500
600
700
800
900
1,000
Phillip Gibbs MSCI ACWI/Financials TR
-10
0
10
20
30
40
50
60
Robert Mumby MSCI ACWI/Financials TR
Jupiter Financial Opportunities 2003-11 Jupiter Financial Opportunities 2011-14
Source:- Lipper
17 Source:- Lipper
Aegon is a brand name of Scottish Equitable plc. Scottish Equitable plc, registered office: Edinburgh Park, Edinburgh EH12 9SE. Registered in Scotland (No. 144517). Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 165548. An Aegon company. www.aegon.co.uk © 2014 Aegon UK plc