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Best intentions

The contrasting approaches taken by Skandia and Rensburg in compiling best ideas portfolios will add interest when comparing performance. Will the long-term relationship between Rensburg’s managers give it the edge?

Hot on the heels of Skandia’s global best ideas fund and around one month before it launches its follow-up UK best ideas fund, Rensburg has sneaked in its own offering.

The main difference is that Rensburg’s version concentrates on its four main managers, Colin Morton, Mark Hall, Paul Spencer and Stuart Sharp.

Of course, a little competition does no harm and it will be interesting to see how the two funds perform against each other.

The normal argument would be that an unfettered-type approach offers greater flexibility and there is no doubt that Skandia has a great team lined up.

Against that, I am sure Rensburg would argue that its very short lines of communication and the fact that its managers have been working together for a long time will give them an edge. Time will tell.

There is little doubt that the Rensburg fund has caught the imagination of the intermediary community as it has taken some 36m in its first 10 days. By any standards this is a large sum but when you consider that the back end of August is not necessarily the best time to launch a fund and that Rensburg (with respect) is probably less well known than many, then this is a truly phenomenal amount of money.

Rensburg would be the first to deny that its best ideas portfolio is merely piggybacking off Skandia. In fairness, when it first launched the UK select growth fund under Mark Hall, its intention was to make this a best ideas fund. However, the fund really turned into Hall’s best ideas – no complaints, they have been excellent. After all, if you put one person in charge as lead manager, they prefer to stand behind their own successes and failures.

So Rensburg argues that this fund fits a gap in its own range between Morton running blue chips, Spencer running mid-caps and Sharp running small caps, with Hall having a relatively unrestricted mandate. The portfolio distribution will allow Morton to have up to 10 blue-chip stocks, Spencer 10 mid-caps, Sharpe up to 20 small caps to allow him greater liquidity and Hall up to 10 unrestricted stocks covering the whole market. Each manager will run their portion of the fund as a segregated account.

At least initially, the intention is to divide the money coming into the fund into equal portions and meet redemptions in exactly the same way. When I spoke to Morton, his view was that this policy would continue for the foreseeable future.

I feel that Rensburg is going to need to revisit this as the portfolio could become seriously unbalanced. For example, a very strong move in small caps would surely unbalance the portfolio. In fairness to Rensburg, I am sure it will cross this bridge when it comes to it.

Anyone who has ever been up to Leeds to visit Rensburg will know that there really is a strong team approach and therefore it does not feel that anything has to be written in stone. This in turn means that it can make sensible decisions on sector weightings.

For example, if all the managers choose financial stocks, they may well need to make a decision on how much risk they are willing to take.

But even in sectors such as financials and oils, the individual stocks can in themselves be very different from each other. You only need to look at the performance of BP and Shell against something such as Burren or Dana Petroleum to see how hugely different individual stocks in a similar sector can perform.

The fund will be driven primarily by the bottom up but anyone who has met Morton will know that the macro environment is especially important to him. This is hardly surprising given that blue chips are driven more by macro events than necessarily the bottom up.

Once again, though, the investment approach will be flexible and as three out of the four fund managers have been working together for 15 years, I cannot believe that they do not know each other’s strengths and weaknesses.

Finally, where might the fund slot in? Well, I see this as a multi-cap offering with an investor appeal across the board. Nor do I believe that the Rensburg offering or, indeed, the Skandia offering is marketing hype as some intermediaries have suggested.

The truth of the matter is that fund managers both from Rensburg and those chosen at Skandia are all very keen to show off their abilities. They all want to be top of the form and if you do not understand that, then you do not understand much about fund managers.

Mark Dampier is head of research at Hargreaves Lansdown

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