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Multi-manager view

It is frustrating for boutique multi-managers such as Miton Investments to hear of the vast sums of new inflows to this arena that are finding their way into some of the marketing leviathans in our industry, even if they have a poor or, in some cases, no track record.

Millions of pounds each year are entrusted to fund managers based on one single factor – brand awareness. Strange then, that statistics show that the top-performing funds are rarely the biggest but time and again investors fall for the marketing hype.

In the IMA balanced managed sector over the last three years, none of the 20 biggest funds were in the top quartile over three years and the top-performing fund, CF Miton special situations was one of the minnows of the sector at under £10m.*

Unfortunately, we seem to be in a world where cover your back is the leading investment principle for fund managers and advisers and the investor is left to carry the costs.

Fund managers are too frightened to stray from their benchmark and intermediaries are too concerned with recommending brands in case they are questioned at a later date as to why they recommended an unheard-of company.

Smaller investment groups such as Miton are in the main only interested in providing a good absolute return for investors.

Ironically, both in the direct equity arena and in fund of funds, the more money a fund attracts, the more unwieldy and ineffectual it becomes. What was once a nimble fund that could adapt with lighteningquick reactions to a change in the market or take exciting positions in small new launches becomes too big and clumsy to function efficiently.

To illustrate this, BWD Rensburg launched a real gem of a fund, UK micro-cap, in November 2002. At launch, the fund was about £3m in size and too small for many of the bigger multi-managers to invest a meaningful amount in.

However, the CF Miton strategic portfolio was £5m in size at the time and we invested 5 per cent of the portfolio into the launch.

Since then, the Rensburg micro-cap fund has risen by 143 per cent, outperforming the sector average by about 100 per cent and contributing significantly to the performance of the Miton fund.

Being a boutique also allows Miton to act more pragmatically in the management of our funds. If we do not think we will make sufficient gains from a market compared with other areas, we will not invest in it. This has led to our not holding any US assets for the last four years across all our funds.

The bigger investments groups are more obliged to stick to benchmark weights even if it means they will fall in value.* Lipper Hindsight: IMA Balanced Managed. All figures correct to January 21, 2005.

Sam Liddle is a fund manager with Mitan Investments


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