I know that many financial advisers will no longer entertain the use of active fund management in perpetuating the long-term wealth of their clients. But I think this country’s investment industry remains a real force for good – a shining light in what is a rather grim looking economy, darkened by the storm clouds that Brexit brings our way.
Rather than knock active fund managers all the time as some do, we should herald the best of them while acknowledging the fact that artificial intelligence will play an ever-increasing role in investment management. All these investment services and ‘techniques’ – active, passive, discretionary management, and fund platforms – have a pivotal role to play in building future personal wealth. Let’s embrace them all.
In recent weeks, we have witnessed some of the best names in asset management launch investment trusts. Mark Mobius has launched the £100m Mobius Investment Trust – shares in the fund began trading at the start of October – while Fundsmith’s Terry Smith is treading into smaller company territory with the launch of Smithson.
Before the month is out, AVI Japan Opportunity will be listed on the London Stock Exchange, with Merian Chrysalis following afterwards.
Exciting times, although some sceptics will no doubt take a different line, stating that the four new trusts are a sign of stock market hedonism before an almighty fall – as in early 2000, just before the bursting of the technology market bubble.
In recent weeks, we have witnessed some of the best names in asset management launch investment trustsThe doubters may well be right in believing markets are heading for a fall but I bet you my pension that over the next 10 years, these new trusts will all make solid, long-term investment returns for investors prepared to stay the course.
I have had the privilege in the past couple of weeks of interviewing three of the investment managers behind these new launches – Mr Smith, Mr Mobius and Joe Bauernfreund of Asset Value Investors. Intimidatory though they may be – Mr Smith especially – you cannot knock their investment record. They are living proof that active fund management can deliver stellar investment results.
Of course, there is no guarantee that their outstanding investment streaks will continue. But I would rather have my money (if I had any) with them than with a bank, or tucked away in a fund dutifully performing in line with the FTSE 100 or FTSE All-Share indices – slightly under-performing when charges are taken into account.
Mr Smith has built a fantastic business on the back of the success of Fundsmith Equity, a fund launched nearly eight years ago with him at the helm. Through fastidious research (a Smith trait), investing in a tight portfolio of quality stocks and refusing to get caught up in short-term noise, he has delivered an annualised rate of return since November 2010 of just short of 20 per cent.
A return twice that from investing in a fund tracking the performance of the FTSE All-Share index. Not surprisingly, the vehicle has now swelled in size to £17bn.
While the Smithson trust will be run by underlings that Mr Smith has brought in from investment bank Goldman Sachs, there is no doubt he will be all over it like a rash. He will ensure the fund is a long-term success, irrespective of any temporary stock market derailments.
Mr Emerging Markets
As for Mr Mobius, he has been scouring emerging markets for investment opportunities since he headed up the launch of the ground-breaking Templeton Emerging Markets investment trust in 1989. He eats, sleeps and breathes emerging markets. Few can rival him for knowledge or, for that matter, performance as evidenced by an annual investment return of 12 per cent during his tenure at Templeton.
Although he is now a sprightly 82, he has brought two trusty, and much younger, emerging market colleagues with him from Franklin Templeton – Carlos Hardenberg and Grzegorz Konieczny – to assist him.
While some may say the £100m trust has launched into strong headwinds, including currency crises and trade friction between China and the US, Mr Mobius seems enthused.
He draws similarities between the market negativity of 1989 when Templeton Emerging Markets was born and now. He views swirls of pessimism and nervousness as an opportunity to construct a portfolio at close to the bottom of markets.
Last but not least, Mr Bauernfreund has done a great job at AVI masterminding the recent renaissance of global investment trust British Empire.
His new offering – AVI Japan Opportunity – may well prove the surprise package of the four, honing in on cash-laden Japanese smaller companies and persuading them (very gently) to give a chunk of it to shareholders as part of good corporate governance.
My hope is that these new trusts will go on to be long-term successes, reaping rich rewards for investors. Also, that asset managers AVI, Merian Global Investors, Fundsmith and Mobius Capital Partners all flourish, in the process waving the flag for everything that is good about active fund management. Best of British and all that – and not a robot, a bit of AI kit, nor an ounce of investment feculence in sight.
Jeff Prestridge is personal finance editor of the Mail on Sunday
