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Every dog has its day

What a difference a couple of months can make when it comes to performance. One minute, one style of fund is top of the charts. The next, something completely different occupies that space.

Sitting near the top of the ever popular UK all companies sector is none other than the well known and at times vilified Manek growth portfolio while close to the bottom is Anthony Bolton’s Fidelity special situations fund.

If there was ever a sign that the market is favouring growth stocks, surely this must be it.

Advisers who have been around for some time are accustomed to market downturns and volatility, so the recent activity is unlikely to shake many experienced investors. The phrase “buying opportunity” becomes common in markets such as these.

The surprise should perhaps be less about market falls and forecasts and more to do with who is juggling the varying market conditions successfully. Seeing Manek growth at the top of the UK all companies sector is a surprise but so too is it to see negative return figures next to stalwarts such as Neil Woodford’s income funds or for George Luckraft’s Axa Framlington funds to be sitting at the bottom of the UK equity income sector, even over three months.

Manek growth turns 10 years old in December and the fact that it continues to exist has been a sore point for some. Over the past decade, and more specifically over the past five years, Financial Mail on Sunday’s Jeff Prestridge, for one, has written some harsh editorials about the lackadaisical attitude of unitholders which has allowed this fund to continue over the years while Bestinvest has repeatedly assigned this portfolio into its so-called “dog funds” category.

Launched in a blaze of publicity after London pharmacist Jayesh Manek competed successfully in a Sunday Times fantasy fund manager competition in the 1990s, the fund was the epitome of the tech boom. At one time, it surpassed £250m in assets and was a popular story to tell in the nationals of how the everyman can invest just as well as the trained professional.

Then the technology, media and telecoms bubble burst, catching numerous professionals off guard (although it is still amazing how many claim they got out before the worst hit) as well as the Manek growth manager, whose style is classed as aggressive growth. The fund, which now has £50m in assets, has been ridiculed ever since and often held up in the press and by advisers as a classic momentum story gone bad.

Now it is number one again – well, at various points in September it was. In the three months to October 8, it was ranked fourth out of 307 and to the 15th it was ranked 28th, according to Morningstar figures.

Manek claims he has not really changed his management style since launching the fund although he does admit having learned some harsh lessons, having now worked through a raging bull market, the depths of a sustained bear market as well as a recovery phase.

These days, Manek still considers himself a growth manager but has started using index futures to help smooth out potential low periods for the fund. Manek says he has used futures on and off throughout the year to the advantage of the fund.

He agrees it does seem that the market is now turning back in his favour after years of value stocks outperforming but he also attributes recent performance to making several good calls. He has been light on financials and consumer retail stocks and overloaded in areas such as energy and metals. As is expected in his fund, he has also been overweight in technology and telecoms.

He says: “I have been in the right sectors but the strategy on the fund still has not changed and it is still bottom up.”

The fund has typically had a bias towards the mid to small-cap end of the market and while mega-caps are outperforming today, his large-cap weighting has not increased significantly. At 33 per cent, it is just over his normal 20 to 30 per cent range for that area of the market, he says.

“After some five years, we are seeing a shift from value to growth again and the fund has always done well in a growth market,” says Manek.

The funds that join him at the top of the sector seem to support that assertion, as do those at the bottom of the three-month performance charts.

HSBC’s focus fund is ranked first in the UK all companies sector over the three months to October 15 while Threadneedle’s high- octane UK Accelerando portfolio is number two. At the same time, Bolton is ranked 221st out of 307 and Jupiter’s undervalued assets manager Edward Bonham-Carter is 202nd.

It will be interesting to see how long this trend lasts and just who will be sitting on top of the sector next month.

Instead of indicating a change in market bias towards growth, if anything, the numbers should reinforce the point that performance data can be incredibly malleable and short-term numbers should never be relied on.


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