It is interesting to see how fund managers react to poor performance. It either leads to obstinacy and a period of sticking to their gun, or to soul-searching and an admission that changes need to be made. With Midas balanced growth and Midas balanced income, the latter was the case.
For years, Midas was the company no one had heard of apart from a select few in the City. Founded by four partners, including Simon Edwards and Alan Borrows, Midas started life managing money for the Merseyside pension scheme, specialising in multi-asset investing. The aim was to be the antithesis of a tracker fund. If the managers liked something, they invested in it. Government bonds, equities, overseas equities, fixed interest, property, structured products, alternative assets – you name it, they probably considered it.
The funds were successfully managed by Edwards and Borrows for a number of years and performance up until 2007 was excellent, so much so that they attracted a wider following. The combination of top performance and a diversified approach was clearly a winning one.
In the past, diversified portfolios have been able to weather recessions reasonably well so, in theory, the funds should have been well equipped to survive the credit crisis of 2007-08. Yet this was no ordinary crisis. Almost every asset class fell sharply and, in hindsight, it was evident the managers were carrying too much risk. The more esoteric holdings in the fund suffered from a lack of liquidity and years of hard work and top performance were undone in a few turbulent months.
In addition to this difficult period of performance, there was the upheaval of the merger with Miton, another niche fund management house, to create MAM Funds.
Each company was a successful, profitable business but a large amount of debt was taken on at precisely the wrong time as part of the merger process.
Today, I am pleased to say these issues seem to be over. Following a fresh round of financing sought by new managing director Gervais Williams, the former smaller companies fund manager at Gartmore, the group is on a sound footing and highly focused.
The most recent chapter in the history of Midas is the decision of Edwards to step down. This is undoubtedly a blow but the appointment of Simon Callow as lead manager on Midas balanced growth, with Borrows taking full charge of the income fund, is a satisfactory outcome for investors.
Callow has been at Midas for nearly six years and his experience, together with Borrows and the rest of the Midas team, bodes well for the future. They also have the Reading-based Miton team, with whom they can share ideas and opinions on markets, funds and investments, as well as Williams, who adds a new dimension with his smaller company experience.
Midas was arguably the first true multi-asset fund management house and for a long time it was the best. There are now many imitators but I believe the Midas team is still one to back. Mr Borrows admits the funds will not be as racy as they were in the Noughties but they are looking to achieve consistent second-quartile performance and returns of between 7 and 10 per cent per annum.
There is no guarantee of this but it is interesting to note the admission of the managers’ shortcomings and desire to return to more consistent, less volatile performance. If the Midas team can deliver once more, these should be core additions to any portfolio for the long term.
Ben Yearsley is investment manager at Hargreaves Lansdown