With the Investment Adviser 100 Club now in its fourth year, our features team asks a selection of multi-managers for their favourite 100 Club members of 2015.
Richard Philbin, Harwood Capital
Henderson UK Absolute Return
Ben Wallace and Luke Newman have managed this fund since 2009 and it is a Ucits version of the successful AlphaGen Octanis hedge fund. The team has nearly $4bn (£2.5bn) in this strategy. The managers pride themselves on delivering added value in a number of areas, not just stock picking but managing the net/gross and the long/short exposures and the ultimate proof has been the strong returns with low volatility and a consistently low beta compared to the FTSE All Share index.
Kames Investment Grade Bond
Stephen Snowden has managed this fund since 2011. The long-term performance has been excellent and he is not afraid to have opinions that differ from its peers. With £1bn in the fund there is an argument that there is greater flexibility compared with many fixed income products in the space and plenty of capacity before his investment approach could be forced to change. One thing that differentiates this fund is that Mr Snowden only invests in investment-grade credits.
BlackRock GF Asian Dragon
Managed by BlackRock’s head of Asian equities, Andrew Swan, this fund is run predominantly from a bottom-up perspective but with a strong eye cast on the macro environment. He is not afraid to change views substantially if the market environment calls for it, and considering the volatility and risks in the region this is a sound approach. Mr Swan and his team manage the vehicle from Hong Kong, where they oversee billions in assets for BlackRock. There is also an onshore version of this fund.
Baillie Gifford Corporate Bond
A core fixed income offering where added value is achieved at the stock line level rather than taking big bets one way or the other. The team manages the fund with an eye on capital appreciation, as well as delivering a monthly income with the intention of providing unitholders with a 1 per cent yield pick-up relative to the benchmark. A small portfolio in size (less than £500m), but one of the better longer-term performing funds in the sector.
Old Mutual UK Equity Income
When you consider the size of this fund compared with the relative performance of its peers, I get the impression it is overlooked. Stephen Message has managed the fund for more than five years and has delivered in terms of performance and yield; achieved through core income and capital growth opportunities. It is a true UK equity income fund where the manager follows the objectives of the sector, aiming to deliver a yield of between 110-120 per cent of the FTSE All-Share index.
Ian Aylward, Aviva Investors
Baillie Gifford Japan Trust
The fund provides concentrated exposure to Japanese equities across the market-cap spectrum and is managed by an investment team headed by Sarah Whitley. We like the partnership structure at Baillie Gifford, which not only serves to incentivise staff but has also created a culture of stability and correspondingly low staff turnover. Investors should be cognisant that the fund’s strong growth characteristics can result in outperformance that is more cyclical in nature.
BlackRock GF Asian Dragon
Andrew Swan’s fund is a strategy with a flexible style. We believe that this flexibility is important in a rapidly evolving market, as is the ability to leverage alpha from different sources as reforms in Asia take hold. Mr Swan has a deep local knowledge of Asian markets, acquired over a long and successful career. Since taking charge in 2011, we feel the changes he has made to the team and processes have paid off, evidenced through top-quartile performance across three years.
Henderson UK Absolute Return
Ben Wallace has been the lead manager on this fund since its inception at Gartmore in 2009, as well as the hedge fund equivalent since 2005. The strategy has a low net exposure, indicative of negligible directionality and a dominance of successful stock picking underpinning the track record. Risk is low, with the gross exposure since launch averaging less than 120 per cent and volatility and maximum drawdown well below that of a long equity index.
Old Mutual UK Mid Cap
This fund seeks to exploit share price inefficiencies within a top-down context and is not wedded to any particular style. Manager Richard Watts describes the approach as pragmatic with 80 per cent of the research focused on bottom-up fundamentals and 20 per cent top-down, with the latter portion being viewed as essential during turning points. We like the fund’s approach and it stands out as having outperformed the benchmark and peers in a variety of market environments.
Royal London Sterling Credit
This is a mainstream UK corporate bond fund that seeks to beat its peer group. Royal London’s long-standing philosophy is aimed at exploiting some long-established inefficiencies. For example, the portfolio is not benchmark-orientated or credit-rating driven like many peers. The company’s approach is notable for the number of unrated bonds held. Also, the nimble size of its fund range means it can add value in less high-profile names or smaller issuers.
John Husselbee, Liontrust
FP Argonaut European Enhanced Income
This fund is run by Oliver Russ and built upon the solid foundation of his European Income fund. There are two features that could attract investors: First, the higher income produced by a buy-write strategy that sells away equity upside to collect a premium that can be added to the income account. Second, the currency hedge that [the] managers use to take out the ups and downs of the euro allows investors greater certainty around returns.
Henderson UK Absolute Return
This fund aims to provide smooth outperformance and limited volatility through both up and down market conditions. The managers seek to achieve this by investing in UK equities and derivatives, taking both long and short positions. The duo has delivered positive returns across most one-year periods since launch, with low volatility compared with the UK equity market. This has been achieved in spite of the fund growing in the past couple of years from £100m to more than £600m.
Baillie Gifford Japan Trust
Manager Sarah Whitley has spent her whole career at Baillie Gifford and has specialised in investing in Japan for most of that time. The key manager attributes we prefer to include in our client portfolios include attention to detail, patience and persistence. She and her team take a fundamental approach, focusing on long-term growth in companies that are underappreciated by the market. This often leads to a fund with a bias towards mid- and small-cap growth stocks.
Jupiter European Opportunities Trust
The fund is run by Alexander Darwall, who brings many years of experience to the sector and his bottom-up stock picking has produced significant long-term outperformance. He has achieved these returns by investing in companies where he can identify superior long-term growth prospects. The emphasis is placed on management structure and ownership, which is conducive to achieving this goal. The trust is a listed closed-end fund so has the ability to gear the balance sheet for extra returns.
Axa Framlington American Growth
Stephen Kelly manages this fund, which seeks to invest in the faster-growing industrials, healthcare and technology markets, and parts of the consumer sector. The fund’s approach focuses on fundamental stock research to construct a bottom-up portfolio and Mr Kelly has historically maintained a bias to mid-cap stocks. The US equity market can be easily and cheaply accessed for short-term trading via trackers. For longer-term investors there is merit in seeking active management.
Ellie Duncan is deputy features editor at Investment Adviser
