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Best of the best – The four new FE Alpha Manager duos

31 January 2015

FE Trustnet takes a closer look at the funds run by two FE Alpha Managers, paying close attention to the duos who have recently been awarded the coveted rating.

By Alex Paget,

Senior Reporter, FE Trustnet

While too many cooks can spoil the broth, the advantages of having two managers running your fund are all too clear to see.

Ideas will bounce off each of the managers and duties such as company meetings or marketing events can be split evenly. Of course, fund manager pairs aren’t always successful but there are a number which have worked very well together.

As a recent FE Trustnet article highlighted, the new FE Alpha Manager ratings have been announced and out of the 182 individuals who hold the coveted rating there are 16 FE Alpha Manager duos – such as Adrian Frost and Adrian Gosden at Artemis, the Jupiter Merlin team of John Chatfield Roberts and Algy Smith-Maxwell and Jan Luthman and Stephen Bailey at Liontrust.

However, in this article, we look at the four manager pairs who only received their FE Alpha Manager status in the recent shake-up.

 
Nick Kirrage & Kevin Murphy

First on the list are Nick Kirrage and Kevin Murphy, who have run funds together since July 2006 and have become increasingly popular with both private and professional investors recently.

Their focus on bombed-out companies which are out of favour with the wider market has meant they have built up an impressive track record and they currently run six funds together at Schroders including UK and global equity portfolios.

While the five crown-rated Schroder Income is the largest of their funds at £1.5bn, we will focus on their £675m Schroder Recovery fund in this article as it is the one with the longest track record.

Our data shows the four crown-rated fund has been a top decile performer in the highly competitive IA UK All Companies sector since they took charge in July 2006 with returns of 138.49 per cent, doubling the returns of the FTSE All Share in the process.

Performance of fund versus sector and index since July 2006

    
Source: FE Analytics

Schroder Recovery is also top decile over three and five years. Though the fund fell into the bottom quartile in the falling market of 2011, Kirrage and Murphy’s value approach protected investors during the financial crash as it was first quartile. It was one of only a few funds to rebound strongly in 2009 as well, turning in top decile returns that year as well.

Their top 10 holdings now include the likes of Morrisons, Tesco and Royal Bank of Scotland and the ongoing charges figure (OCF) is 0.92 per cent.

 
Geoff Legg & Charles L. Heenan

Sticking with the value theme, Geoff Legg and Charles L. Heenan have started to garner more attention among fund buyers due to their disciplined approach to global equities on their Kennox Strategic Value fund.

The £321m fund looks very different to its peers in the IA Global sector thanks to the managers’ approach, which centres on capital preservation and leads them to hold high levels of cash if they see a lack of opportunities in the market.

Currently, the fund is made up of just 28 holdings and has 16 per cent in the cash.


According to FE Analytics, Kennox Strategic Value has been a top quartile performer since its launch in July 2007 with returns of 77.17 per cent. As a point of comparison, the FTSE All Share has returned 59.09 per cent.

Performance of fund versus sector and index since Jul 2007



Source: FE Analytics

As a result of its positive returns in the crash year of 2008 and its top quartile numbers in the falling market of 2011, Kennox Strategic Value has scored very well in terms of its capital protection characteristics.

FE data shows it is top decile for risk adjusted returns, as measured by the Sharpe ratio, and has the lowest maximum drawdown – which calculates the most an investor would have lost if they had bought and sold at the worst possible times – in the sector since launch.

It did struggle last year as it was bottom quartile with losses of 1.43 per cent, but that was due to Legg and Heenan’s decision to hold very little in the roaring US market which they recently described as an area long-term investors should avoid at all cost due to its valuation. 

They currently favour European equities and the fund’s OCF is 1.13 per cent.


Scott McGlashan & Ruth Nash

A number of experts have tipped Japanese equities to have a good 2015 as the Bank of Japan is continuing with its unprecedented quantitative easing programme and pro-growth prime minister Shinzo Abe has just won a super majority in the recent elections.

Because of that, they may want to turn to new FE Alpha Managers Scott McGlashan and Ruth Nash’s JOHCM Japan fund or their recently launched JOHCM Japan Dividend Growth fund.

McGlashan launched the £680m JOHCM Japan fund in May 2004 and Nash joined him as co-manager in March 2008. Since inception, the four crown-rated fund has been a top quartile performer in the IA Japan sector, beatings its TOPIX benchmark by more than 10 percentage points.

Performance of fund versus sector and index since May 2004



Source: FE Analytics

The fund is second quartile over three and five years but is bottom quartile over 12 months.

Those lower returns are largely due to the fact that the duo has a high weighting domestic earners and to mid and small caps, which have lagged behind the mega-cap exporters and international earners buoyed by the weakened yen.

It is a concentrated portfolio of just 61 holdings and McGlashan and Nash have a big bet on Toyota, which accounts for 5 per cent of the fund.

JOHCM Japan has an OCF of 0.85 per cent, but like all Jo Hambro funds it has a performance fee.

 
Andrew Greenup & Peter Meany

Andrew Greenup and Peter Meany have joined First State colleagues Angus Tulloch, Martin Lau, Helene Williamson and David Gait as FE Alpha Managers in the recent rebalancing.

Their five crown-rated First State Global Listed Infrastructure fund is arguably the most niche to feature in this list – given that it invests in companies that are involved in infrastructure around the world such as water and electricity utilities, highways and railways, airports services, marine ports and services, and oil and gas storage.

However, it is clearly popular among investors given that its AUM has grown to £1.1bn.

Meany launched the fund in October 2007 while Greenup joined him in June 2011. Since inception First State Global Listed Infrastructure has returned 82.28 per cent while the average fund in the IA Global sector has gained 40.46 per cent.


Performance of fund versus sector and index since Oct 2007



Source: FE Analytics

The fund is one of Square Mile’s, the investment research firm, favoured funds for inflation-protection given the types of companies it holds and as Greenup and Meany prioritise income growth.

Their largest sector weightings are toll roads, regulated utilities, integrated utilities and passenger rail. The fund yields 2.3 per cent and has an OCF of 0.83 per cent.

 

 

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.