While those managers fully deserve the inflows as a result of their consistent outperformance over the long term, there are many managers who have turned in decent numbers over recent years but, so far, only run a small pot of money.
In this article, Richard Romer-Lee (pictured) – managing director at Square Mile – highlights five managers that he thinks investors should take a closer look at for their portfolios. While a number of these managers only have short track records, as you would imagine, some are very experienced and have been running money for a long time.
Graham Campbell
Arguably the most experienced of the five is Graham Campbell, who launched his £44m Saracen Global Income & Growth fund in June 2011.
“Graham has been around the block a bit: he worked at Edinburgh Fund Managers, then at SWIP and has now set up a business called Saracen,” Romer-Lee said.
“They set up a global equity income fund and they are looking for growth income and growth in capital from large, global, well-run and financially strong companies that can generate good revenue, good profits and dividend growth.”
“It’s a really simple concept and it’s only got about £40m in it. He has David Keir working with him and these are quite seasoned investors who’ve decided ‘this is what we think we are good at’. It’s an interesting fund which is thinking about the new world.”
According to FE Analytics, the Saracen Global Income & Growth fund – which yields 3 per cent – has been the third best performing portfolio in the IMA Global Equity Income sector since its launch with returns of 45.46 per cent.
Performance of fund vs sector since June 2011
Source: FE Analytics
It outperformed the sector in 2012 and 2013, but is currently third quartile this year with returns of 4.64 per cent.
Campbell runs a diversified portfolio, with his top 10 holdings accounting for 25 per cent of his total assets. His largest regional weightings are North America (31 per cent) and Europe ex UK (26 per cent). For those looking for diversification, the fund has just 6 per cent in the UK – though HSBC and GlaxoSmithKline feature in his top 10.
The fund has an ongoing charges figure (OCF) of 1.03 per cent.
Jonathan Pines
Romer-Lee also rates Jonathan Pines highly and the manager’s five crown-rated Hermes Asia ex Japan fund has taken the IMA Asia Pacific ex Japan sector by storm since its launch in October 2012.
“Hermes is not a very well-known business – it’s the old BT pension fund business – and there are some pretty good investors in there running on a sort of multi-boutique approach,” he said.
“[Hermes Asia ex Japan] was a segregated mandate which opened to retail investors in 2012. In Asia, where a lot of money is invested with Aberdeen, First State and Schroders, people are looking for diversification.”
“Pines will invest anywhere and thinks about risk as permanent loss of capital, which is interesting as it is a bit more aligned with how investors think, in my opinion. He has a contrarian and value approach and so is not so bothered about quality.”
Our data shows the $1.1bn Hermes fund has topped the sector since its launch with returns of 49.88 per cent. As a point of comparison, the average fund in the sector is up just 16.54 per cent over that time.
Performance of fund vs sector since Oct 2012
Source: FE Analytics
Pines has told FE Trustnet in the past that those returns stem from the fact he tends invest in areas where a lot of his peers won’t.
For example, he warned earlier this year that too many investors were overpaying for safer, defensive high quality stocks due to their concerns over the short-term outlook for emerging markets. He said a bubble was developing in that area of the market and, instead, he has a large cyclical bias within his portfolio.
Hermes Asia ex Japan has an OCF of 0.86 per cent.
Daniel Hanbury and Philip Rodrigs
Romer-Lee is a big fan of FE Alpha Manager Daniel Hanbury and Philip Rodrigs, who is also an FE Alpha Manager and joined Hanbury at R&M from Investec earlier this year.
He rates the two managers’ funds and is particularly excited about R&M UK Equity Smaller Companies, which had been under the stewardship of Hanbury but is now run by Rodrigs – though the former still works on the portfolio as well.
“I think R&M is a really interesting business,” he said.
“Dan Hanbury was one of the guys who set it up originally, having worked at Investec before that running a small cap fund. When he went to R&M, Philip Rodrigs took over that small cap fund. Hanbury was one of the best managers in the business, but conceded that Rodrigs was much better.”
“I think the two of them are quite interesting, as a dynamic. They run small cap, equity income and a recently launched a micro-cap fund. They are interesting guys who are quite young, but they are passionate and experienced.”
According to FE Analytics, the five crown-rated R&M UK Equity Smaller Companies fund has comfortably outperformed both the IMA UK Smaller Companies sector and its Numis Smaller Companies ex IT benchmark since launch in November 2006 with returns of 135.38 per cent.
Performance of fund vs sector and index since Nov 2006
Source: FE Analytics
Rodrigs – whose Investec UK Smaller Companies fund had consistently topped the sector tables – took on the portfolio in September this year.
The £434m R&M UK Equity Smaller Companies fund has an OCF of 0.95 per cent.
Thomas Moore
The final name on Romer-Lee’s list is Thomas Moore, who heads up the five-crown rated Standard Life UK Equity Income Unconstrained fund.
Romer-Lee is a fan of the manager, especially as his approach to investing – which is centred around finding a growing source of income rather than focusing on high yielding stocks – means his £700m fund looks very different to most of the other UK equity income funds.
“He has a got a real understanding about how important income, and the re-investment of income, is over the long-term.”
Romer-Lee added: “He is quite an interesting guy and he is not afraid to go against the grain. He has not really been tested by a savage down market yet so we will have to see how he gets on when that happens.”
Moore took over Standard Life UK Equity Income Unconstrained in January 2009.
According to FE Analytics, it has been the fourth best performing fund in the IMA UK Equity Income sector over that time with returns of 187.24 per cent. As a point of comparison, the FTSE All Share is up 96.82 per cent.
Performance of fund vs sector and index since Jan 2009
Source: FE Analytics
The fund was a top decile performer in 2009, 2010, 2012 and 2013 and will be top decile once again in 2014. The year it underperformed was during the falling market of 2011, where it was bottom decile with losses of 9.85 per cent.
Given that the manager is focused on finding dividend growth, he holds a significant proportion in the lower end of the FTSE All Share. For instance, Moore holds 45.6 per cent in the FTSE 250 and 6.1 per cent in the FTSE Small Cap index.
Standard Life UK Equity Income Unconstrained has a yield of 3.94 per cent and an OCF of 0.9 per cent.
