Private investors in the UK have long shown a tendency to stick with well-known fund managers, such as Neil Woodford or Anthony Bolton. But fund statistics suggest that many other managers have been quietly outperforming for years – even though the average investor may never have heard of them.
For example, while Peter Spiller, Nick Train and Giles Hargreave are not household names, they have all built up impressive long-term performance records, and their funds are frequently included in wealth managers’ client portfolios.
According to financial advisers, managers like these can go unnoticed by the public because the companies they work for do little in the way of marketing. Some of the best-performing managers run investment trusts which, as listed companies, often have no marketing budgets. Unit trusts, by contrast, are generally run by large fund management groups that can afford to advertise extensively.
James Maltin, investment director at Rathbones, points to Peter Spiller at CG Asset Management as one of the best managers around – but not one of the best known.
Spiller has achieved a compound annual return of 17.4 per cent since he started running the Capital Gearing Trust in 1984, compared with an annual return of 11.3 per cent from the FTSE All-Share index.
Nick Train, who runs the Finsbury Growth & Income investment trust, is also singled out by Maltin as having a “fantastic track record” – Train has outperformed the FTSE All Share by more than 3 per cent a year on average for the past decade.
Bruce Stout, manager of Murray International, and Mark Sheppard, manager of Manchester & London, are two other investment trust managers whom Maltin says are not well known outside their field. Murray International has risen 224 per cent in the past 10 years while Manchester and London has risen 243 per cent – compared with a rise in the FTSE All Share of 64 per cent over the same period.
“Their names aren’t up on a billboard in Paddington Station,” says Maltin. “They haven’t got a sales team behind them, they’re not desperate to go out and raise assets, they’re focused on doing what they do.”
But the investment trust sector is not the only source of hidden talent. Many managers of smaller unit trusts can go unnoticed – espcially if they work for boutique investment houses that spend less on publicising their funds.
Haig Bathgate, chief investment officer at Turcan Connell, favours funds from CF Walker Crips run by Jan Luthman and Stephen Bailey. Their Equity Income fund, for example, outperformed the FTSE All Share over three, five and seven year periods to the end of January. But, as Bathgate points out, the company does barely any advertising. “Some fund managers are very good at managing money but not very good at marketing,” he says.
Giles Hargreave is a popular small and micro cap manager at Marlborough, a boutique company, whom Adrian Lowcock at Bestinvest says “is obviously happy being his own boss”.
Lowcock says UK investors tend to be more familiar with fund managers who run UK mandates, as historically this is where their portfolios have been overweight. Chris Rice at Cazenove and Leon Howard-Spink at Schroders, for example, are respected European fund managers but they are not familiar to UK investors who often ignore Europe.
Some fund managers so dominate their sectors that they overshadow others. Neil Woodford and Bill Mott may be the best known managers of UK Equity Income funds – but Lowcock rates Karen Robertson at Standard Life very highly. However, he acknowledges that star fund managers are well known for good reason: they have consistently outperformed the market. He notes that if a fund management house is willing to promote a manager heavily, it is probably willing to allow him or her a relatively free rein on investment decisions.
“Clients whose assets you are looking after certainly do get comfort from seeing some names they’re familiar with in their portfolio,” says Tom Becket at PSigma. However, he tries to mix familiar names with lesser-known managers, to provide balance.
Advisers also warn that some fund managers may have become too popular – and ended up running large funds that are unwieldy (see below).
But some think the industry is now moving away from a “star” culture that only promotes big names. In part, this is because some celebrated fund managers failed to outperform during the recession. Neil Woodford has missed much of the recent rally because he stuck with defensive stocks in 2009 and 2010.
There is also more pressure for advisers to prove their worth to clients, with commission set to be banned from 2013. “I think that star culture has worn off a bit,” says Becket. “Rather than a name-driven industry, I think it’s more meritocratic now.”