Mam Funds’ Gray suffers performance woes

Mam Funds’ £840m CF Miton Special Situations fund has fallen into the bottom quartile in three years and is virtually bottom of its sector in one.

Data from Morningstar shows the fund, run by veteran multi-manager Martin Gray and James Sullivan, shows the fund is ranked 102 out of 115 funds with a return of 10.4 per cent for the three-year term and is 130 out of 131 funds for the one year term after it delivered 0.1 per cent.

Mr Gray is known for his ultra-bearish stance on markets which proved fruitful during the most recent financial crisis. His fund was one of only five out of 96 to deliver positive returns in 2008 - while another fund to achieve that was the pair’s CF Miton Strategic Portfolio.

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The manager’s five-year return of 21.6 per cent puts the fund in the top quartile of the IMA Flexible sector even though it was previously in the less risky IMA Mixed Investment 40-85 per cent Shares sector, formerly the Balanced Managed sector.

The manager said he was happy with how the fund was positioned and would not begin chasing markets higher.

“There are a lot of danger signs out there and so why would I want to take risks on behalf of underlying investors?” he said

Mr Gray said investors bought his fund to offer them protection within their portfolio when markets were more volatile and that it would protect value over the long term.

The manager said he would invest in risk assets when he saw value but at present maintained a 29.6 per cent ‘managed cash’ weighting as he said he failed to see value in equities.

Mr Gray said earnings growth was predicted to be marginal, as was GDP growth.

“Price to earning ratios are not excessive but above norms and you would not expect that to be the case when you have flat to negative earnings growth,” he said.

The fund moved sectors in May last year and at the time the group’s distribution director Graham Hooper said the decision was made to allow the managers to pursue their “unconstrained macro-driven approach” which had delivered consistently over the past 15 years.

Mr Gray said the sector ranking was “irrelevant” to Special Situations.

“I could not stay in the sector I was in because it was too restrictive and we moved the fund so we could have freedom of investment,” he said.

Elsewhere, the manager said a large exposure to non-sterling denominated investments had been a headwind for his portfolio.

“One drawback of the past year has been the strength of sterling, which has not been a great help as we have a large chunk of the fund in non-sterling assets,” he said.

However, fund buyers have said they would stick by Mr Gray’s fund.

Patrick Connolly, head of communications at AWD Chase de Vere, said Mr Gray was still a manager the company liked and continued to hold.