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John Chatfeild-Roberts

Star fund managers are born, not made, believes Jupiter’s master of multi-management. His new book, Fundology, explains how to identify the best managers but he fears that individual investors lack the courage to follow their convictions and are still stuck in the tracker mentality, says Matt Davis.

Multi-manager maestro John Chatfeild-Roberts reveals the secrets of his approach in his new book called Fundology.

The book reveals that the Jupiter director forms rapid impressions of everyone he meets. “As I get older, throughout my everyday life I find myself subconsciously categorising people I meet quite quickly, comparing them to similar personalities I have met in the past,” he writes.

This includes journalists, so Money Marketing is careful to arrive early for the interview. Chatfeild-Roberts is impressed with his interviewer’s choice of fountain pen so things are off to a good start. How did the book come about?

He says: “It was not my idea. The editor, Jonathan Davis, did some work for us in mid-2004 and afterwards he said: ‘You really ought to write a book about this.’ He came back seriously at the end of the year an said if I would write it, he would edit it.”

Chatfeild-Roberts’ habit of crediting others for many of his achievements is reinforced in his book, which is peppered with quotes from the likes of George Bernard Shaw and Winston Churchill “because they have much better brains”.

But the book was delayed because once he started writing, Chatfeild-Roberts realised he could not easily distil his thoughts into a 140-page volume. He has learned his lessons from 15 years of multi-manager investing, first at Henderson and Lazard, then at Jupiter since 2001.

The book was due for completion last October but the first edition of 5,000 copies went through numerous rewrites and edits before rolling off the press at investment publisher Harriman House this week.

“The problem is that investing is not very simple. Chapter three, for example, could be twice as long but carries a warning that readers may want to skip the section and return to it later if they need to.”

The chapter in question contains detailed technical information on the structure of unit trusts and Oeics. It was not the author’s favourite but he felt it necessary to include for the sake of readers’ understanding. More interesting chapters to write – and, he admits, to read – describe how to pick the best fund managers, perhaps because they revolve around other people’s skills.

Chatfeild-Roberts believes that fund managers either have the necessary insight or they do not. This includes possessing the humility to admit mistakes and to be flexible in approach. He says these are inborn traits, not taught, and he has spent the past 15 years identifying managers who have them.

“In some ways, fund management is a process of natural selection and there are very few managers who can last the distance.”

James Findlay, who runs the Findlay Park US opportunities fund, is a manager who has lasted the pace. After Chatfeild-Roberts invested in 1992 in the US opportunities fund that Findlay previously ran for Foreign & Colonial, his money doubled in six years. He followed Findlay in 1998 when he set up Findlay Park, seeing continued outperformance while the F&C fund has dropped off by comparison.

Chatfeild-Roberts believes that managers can find themselves restricted by their early learning experiences in fund houses although these are nevertheless valuable. He feels that the key to achieving the best returns is being able to “express oneself” through a portfolio.

He has demonstrated insight of his own through the asset allocation of his funds of funds. He timed the turn in equity markets in March 2003, switching his portfolios into high alpha funds and reaping the rewards. His growth portfolio is up by 52.6 per cent over the five years to January 17 and is ranked second in the managed growth sector.

Despite giving away his secrets in the book, Chatfeild-Roberts is not concerned that private investors will start to outperform him. He has been outspoken about multi-managers who aim to achieve second-quartile performance by investing in a number of managers in a region.

He says that if he likes a manager, he will back him all the way. Private investors rarely have the courage to do this, nor can they stomach market falls such as last week’s Japanese correction.

Chatfeild-Roberts says he used this as a buying opportunity but many retail investors would prefer to continue putting their money into tracker funds, which he cannot stand. The book’s appendices feature graph after graph of poor-performing trackers.

“It pains me to think there really is an awful lot of money invested in those things and, particularly with open architecture, these days it is very easy to do something about it. Trackers all perform in line with each other and one is just a bit cynical, that is all. Investors can draw their own conclusions.”

Chatfeild-Roberts’ book seems finally to be suggesting that investors should give him their money but it would not be for him to make that connection. He would prefer to leave that to somebody smarter than he is.

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