The time to hold defensively focused star managers such as Neil Woodford, Angus Tulloch and James Findlay has passed, according to Cazenove’s Robin McDonald (pictured), who thinks there is far better value in the cyclical market.

McDonald, co-manager of multi-manager at the firm, held all three managers last year, and continues to rate them highly; however, he says previously out-of-favour managers such as Fidelity’s Sanjeev Shah, GLG’s Stephen Harker and Chris Rice are better suited to the current macro environment. 

"Safety has been key for the last few years, but now I think this area is overpriced," he commented. 

"In 2011 it paid to be cautious, but since the fourth quarter of last year where cyclicals began to look cheap, I’ve moved out of the likes of Woodford and into Shah." 

The manager believes the vast amounts of money that have poured into quality dividend-paying UK companies have put them on too big a premium and has sold out as a result. 

"We no longer have any money in Neil Woodford across our portfolios," he confirmed. 

Even if the markets fall, McDonald doubts whether defensive managers will be able to protect against the downside as effectively as they have in the past.

If there is a significant sell-off in equities, he says the most expensive companies on high price-to-earnings ratios are likely to be hit harder than cheap stocks that have already suffered falls.

Performance of managers over 3-yrs



Source: FE Analytics

Over the last three years, Woodford has significantly outperformed the more cyclically focused Shah, with less volatility. Woodford has returned 35.33 per cent compared to Shah’s 5.95 per cent over the period. 

However, McDonald is confident the tide is about to turn in the Fidelity manager’s favour.

This trend has already been evident since McDonald took on a more cyclical focus at the beginning of the fourth quarter of last year. 

Since 1 October 2011, Shah has returned 20.86 per cent, beating Woodford by 5.79 percentage points.

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Performance of managers over 1-yr



Source: FE Analytics 

Cazenove’s view is in direct opposition to the Jupiter Merlin team, which continues to back defensively focused funds such as Invesco Perpetual High Income, Artemis Income and M&G Global Dividend across its multi-billion pound range. 

McDonald is responsible for more the £1.3bn of assets at Cazenove. His biggest fund is the £903mCazenove Multi Manager Diversity portfolio, which sits in the IMA Mixed Investment 20-60% Shares sector. 

According to FE data, McDonald has returned 11.43 per cent since taking over his first investment portfolio back in September 2007 – more than twice as much as his peer group composite, with less volatility.  He has also outperformed over one and three years.

Performance of manager vs peer group

Name	1-yr returns (%)	3-yr returns (%)	Returns since Sept 2007 (%)
Robin McDonald	10.84	21.69	11.43
Peer group composite	8.99	20.01	5.16

Source: FE Analytics

The Cazenove Multi Manager Diversity fund is a top-quartile performer over five years, with returns of 23.52 per cent. 

He heads up Cazenove’s multi-manager range with Marcus Brookes, who was formerly at Gartmore.

The Diversity fund has a minimum investment of £1,000 and a total expense ratio (TER) of 1.8 per cent. Fidelity Special Situations, GLG Japan Core Alpha and Cazenove European Income are among the fund’s top-10 holdings.