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October 17, 2008 3:00 am
A change of manager at the £144.4m F&C Multi-manager Growth fund has heralded some fresh thinking and a more defensive stance.
Dean Cheeseman, formerly head of developed markets at Forsyth Partners, took over from Richard Philbin as head of the multi-manager division in May.
Driving his vision for the fund was a concern about the intensive correlation of underlying management styles in the portfolio. "There was too much exposure in equities to mid-cap value stocks, so we moved up the cap scale to address that," he explained. "Given the economic climate, small to medium-cap stocks are likely to do less well than large-cap stocks."
He sold out of AXA Framlington's Equity Income fund, with its focus on small to mid-cap stocks, reduced exposure to Cazenove Capital Management's UK Growth and Income fund, as well as exposure to New Star European Growth which has a mid-cap bias.
An increased allocation was made to Schroder's UK Alpha Plus fund because of its large-cap bias. The position in BlackRock's UK Absolute Alpha fund, which was purchased in February, was increased in April to reduce volatility in the portfolio. Parvest US Value fund was sold and replaced with a tracker of the S&P 500 index.
Mr Cheeseman's reasoning is that the tracker provides exposure to "the most efficient market in the world" in the most cost efficient manner.
This faith in past performance leads to a preference for funds handled by experienced managers. Mr Cheeseman said this is pertinent during testing times, as such managers are able to recall previous downturns.
He said: "I don't mind if a fund manager was considering a course of action that they discussed with us but then doesn't pull the trigger on it providing the methodology behind it remains consistent. We don't expect a fund manager to have a crystal ball."
There are 16 underlying funds with a large domestic bias (40.8 per cent) and Mr Cheeseman likes to get under the skin of the fund, how it operates and grasp what the manager does "on a nine-to-five basis".
The conclusions are then combined with results of quantitative screens which establish fund managers' style, value and cap positioning. "There is no single perfect way to run money but what I'm trying to do is stress test the reproducibility of the process. If they have consistently outperformed over time then I have more faith in the quantitative analysis, it's validated. This combination acts as a sanity check," Mr Cheeseman said.
The fund has outperformed the IMA sector average for the past three years, returning 6.4 per cent compared with 5.2 per cent.
Anna Lawlor is deputy features editor at Investment Adviser
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