View more on these topics

Multi-manager View: Take your pick

In the fund management department of Hargreaves Lansdown we believe there are three drivers to equity fund performance – size bias, style bias, manager’s stockpicking abilityBy size, we are considering the fund’s exposure to small companies, mid-sized companies and large companies. By style, we are talking about the fund’s exposure to high-yielding stocks or lower yielding stocks.

To see the importance of a style or size bias investors merely have to look back at history. For instance, in 1999, high-yielding stocks, as represented by the FTSE 350 high yield index underperformed low-yielding stocks by 9.74 per cent while FTSE 100 stocks underperformed FTSE small cap stocks by 33.22 per cent. Fund managers that had a tendency towards higher-yielding and smaller companies over the last few years will have had a tailwind behind them while large-cap managers with a low yield tilt would have been fighting a headwind.

Relatively few managers are able to change their style to fit changing market conditions and generally stick to one investment style. We avoid the temptation of targeting sectoral, style or geographical positions since we do not believe that this is our own skill set. We try to follow the basic principles that lead to superior performance by individual fund managers – stockpicking ability to drive long-term performance.

This iis how we approach building our fund of funds. he key for us is to separate the manager’s skill from the luck of being in the right style at the right time. We search for managers to outperform their style on a consistent and meaningful basis over the medium to long term.

The by-product of our search for these attributes (qualitative as well as quantitative) can be most starkly seen in our HL multi-manager special situations trust which has no geographical restrictions.

Our hunt for these exceptional stockpickers has led us to have significant holdings in Phillip Gibbs’ Jupiter financial opportunities, Mark Hall’s Rensburg UK select growth, Luke Kerr’s Old Mutual UK select smaller companies (offshore), Phillip Wolstencroft’s Artemis European and Richard Pease’s New Star European growth funds, to name but a few.

All of these managers have exhibited exceptional stockpicking ability over the longer term. By combining these top managers from around the world, our aim is to produce the highest total returns.

Recommended

Award follows year of tragedy

Paradigm Norton financial planning manager Lin Ashurst overcame a year of tragedy to win the Woman IFA of the Year title. She received the Women’s Financial Adviser Group award just a year after her husband Robert’s death from cancer. Her boss, Norton Partners’ founder David Norton, also died from cancer just a few weeks later. […]

Weight of the nation

Unum Provident chief medical officer Professor Michael O’Donnell talks about the nation’s increasing problem of obesity in adults and children and how insurers must work with employers, the Government and health bodies to fight the epidemic

Independent board to hold sway

The NPSS should be governed by an independent board with the statutory duty to look after investor interests and publish an annual Parliamentary report, the Investment Management Association has told MPs. In a briefing paper to MPs, the IMA says it is not lobbying for the introduction of the scheme but, if it is implemen-ted, […]

Comms role for Murray in big reshuffle

A week of resignations, retirements and appointments at the FSA has seen former journalist John Murray take the helm of the regulator’s communication team. The appointment of Murray as communications director came in a week that also saw the departure of three lead- ing members of the regula- tory body. Murray’s role is newly created […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment