F&C Multi-Manager Solutions Team Notches Up 20 Years

by | Apr 28, 2016

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Brown Shipley

The F&C Multi-Manager Solutions Team is celebrating 20 years in fund management and has taken the opportunity to look back over their approach to fund selection.

The nine-strong team, co-headed by Rob Burdett and Gary Potter, first got together in 1996 and they manage £2.7bn in assets, including £2.4bn across its risk targeted F&C Multi-Manager Lifestyle and returns focused F&C Multi-Manager Navigator ranges. Since coming together, the team reckons it hosted over 10,000 fund manager meetings, attended 500 UK investment conferences and invested approximately £12bn in funds.

Milestones include the Asian financial crisis (1997), the tech melt up and down (1999 – 2003) and the global financial crisis (2008/09). The team also reckons that the fund management industry has also undergone radical changes, with many fund management groups having disappeared and new entrants established, as well as substantial change in industry regulation. Key changes during the period include the:

  • fund of funds industry has grown from approximately 3% of the UK funds industry to around 12% today, and looks set to expand further;
  • composition of the UK stock market has changed considerably, with 65 companies in the FTSE 100 in 1996 no longer independent businesses, for example;
  • number of IA sectors has fallen from 45 to 37. Some sectors have disappeared, such as the Index Bear sector, and new sectors launched including the Targeted Absolute Return sector.

Potter said: “Despite all of the changes we have witnessed in markets and the fund management industry, the way we run money has not materially changed. Fund selection is a people’s business. Finding consistently good performers is challenging. What we have found to be successful in our fund selection process is backing funds early with conviction, and not always gravitating to large funds that populate fund buy lists. For us it’s about those managers that are building a performance track record rather than living off past successes, and discovering the unloved and undiscovered new managers for the future.

“The investment landscape has changed considerably too. Traditional income sources are under pressure from a yield perspective; alternative asset classes, such as infrastructure, that were once non-existent in portfolios are now a staple; and central bank policy is making it harder to generate alpha. Under these circumstances it’s about staying relevant. Fund managers need to adapt funds so they can take advantage of the market conditions they are faced with. Above all, it’s about finding the right managers at the right companies at the right time.”

The team has identified six principles when investing and choosing a fund:

  1. It’s a people’s business: fund selection is about understanding how a fund manager works, the team and people he / she has behind them and the corporate environment they’re working in. Understanding what makes them tick is critical, as changing market or company conditions can significantly affect the outlook for a fund;
  2. The power of boutique: there is strong potential when investing in a boutique. They have strong alignment of interest with investors, are typically unconstrained in investing style, are more likely to have a pure focus on portfolio management, and are more conscious of capacity;
  3. Cost is important but value is vital: when an investor chooses active, then value for money is even more important. There are markets / sectors that exhibit a stronger case for going active;
  4. Be the best informed investor you can be: due diligence is equally important when monitoring a portfolio as it is when selecting a fund. Funds that were once top of their game may have since become hamstrung by capacity issues, have experienced a fund manager change or been at the mercy of market events. Making sure a portfolio is current in today’s market environment is critical;
  5. Admit if you are wrong and move on: we are all human and make mistakes. For investors, it’s about identifying these and not trying to ‘stick things out’ in the hope that markets or funds will turn in their favour;
  6. Be involved in a fund when it is creating a track record, not living off it: experience tells us, when funds become over popular and feature on many buy lists they can become too large to manage effectively. This in turn can have an impact on performance. It is vital to be aware of tomorrow’s funds today and try to avoid funds that were industry darlings that may not be as attractive as they perhaps once were.

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