It is almost eight months since Skandia launched its global best ideas fund while the UK version is five months old. This is obviously a very short period but I think it is worth looking at how they have performed.
The global fund is second in its sector after rising by 21.5 per cent since launch – it would rank sixth in the global growth sector, which I think is more competitive – and is top quartile in the year to date.
The UK fund has also got off to a cracking start. It is ranked 21st since launch and 28th in the year to date. Remember, this is out of more than 300 funds, so that places it in the top decile.
I was somewhat surprised by the lukewarm reception the funds got from my fellow pundits. Perhaps it was an aversion to multi-manager funds or they did not look beyond the marketing. It was easy to label the funds as nothing more than a marketing gimmick but, if you look closer, you will find a superb investment case.
It was probably easier for me, given that Alan Durrant and Spike Hughes, then Skandia’s investment director and head of sales respectively, used to work at Hargreaves Lansdown. I knew they shared our philosophy of finding the best managers to run money and spending minimal time on asset allocation.
I find the notion of putting together 10 managers and asking each to choose their favourite stock ideas very attractive. By selecting fund managers with varying styles and market cap biases, Skandia has achieved a balanced portfolio with a focused approach that none of the managers could achieve individually. They are unconstrained by sector or style and can invest up to a quarter of their allocation in a single stock. If a manager becomes bearish, they can also have up to a quarter in cash, so there is scope for this fund to move towards an absolute return mandate if market conditions deteriorate.
The asset allocation of global best ideas is 50 per cent in the UK, with the rest set by GDP, making it a natural fit for a Sipp portfolio. The majority is invested in bigger companies, with 16.8 per cent in mid-caps and 11 per cent in smaller companies.
The UK fund is skewed more towards the smaller end, as this is where top fund managers will find most anomalies. It has 40.3 per cent in the FTSE 100, 31 per cent in the Mid 250, 11.8 per cent in Aim and 7.4 per cent in the small-cap index. It is therefore a classic multi-cap fund. Successes have come from the likes of Barratts (up by 32 per cent), Vodafone (37 per cent) and Corus (71 per cent).
At launch, there were questions on stock overlaps and whether this meant that a huge amount of money was going to be in just one or two shares. So far, however, no stock in global best ideas has been held by more than three managers and no stock has been more than 5 per cent of the fund. In UK best ideas, no stock has been held by more than four managers and, again, no stock has been more than 5 per cent of the fund. This leads me to believe Skandia has done its research well and the portfolio has plenty of diversification.
Statistics show this is not just a bull market philosophy. On 71 per cent of days when the FTSE All Share has fallen, UK best ideas has fallen by less and has actually risen on more than half of those occasions. This reflects well on the Skandia investment team who manage the managers. All deals and fund positions are monitored constantly as part of an active dialogue with the underlying managers. The fund has proved to be hugely popular with the investing public, who in my opinion always appreciate a straightforward idea when it is delivered well.
If you have not looked at these funds, I recommend you do so. So far they have proved to be well blended and not nearly as risky as some IFAs may have feared. Surely it is a no-brainer to have clients’ money run by the best managers around?
Mark Dampier is head of research at Hargreaves Lansdown.