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Multi-manager view: Tony Yarrow

In a world where we are all increasingly specialising to survive, someone who is a fund of funds manager and a financial adviser looks out of place. Surely it is a way of doing both things badly? Why not do just one of them properly and have an easier life?

My problem is that I have done both jobs since 1998 and still cannot decide which one to give up. Being an adviser, I love meeting new people, finding out what they want and trying to provide it, working to earn their respect and trust, gradually building those precious relationships which deepen over the years.

Being a fund of funds manager is far more of an intellectual challenge. You are looking at the markets and trying to work out what is going to happen next; talking to fund managers, and trying to work out who will best survive the next big fall, or the next big rise in the market.

Many fund of funds managers do not use investment trusts but we find them invaluable. They allow us access to important areas such as private equity that are not available in the unit trust universe.

Up until last year, when we launched our Oeic umbrella, our funds were broker funds administered by life insurance companies. Despite the universally bad press that broker funds received, quite a few performed well. Believe it or not, our funds have been consistently top-decile over the past decade. But the results are history and do not tell us how to manage funds on a day-to-day basis.

We have to look for the big trends, of which there are at the most only two or three a year. At the Fidelity Funds Network Conference in February 2003, a number of eminent fund managers were asked what returns they expected from shares in the years ahead. They all said 7 per cent a year.

In the two years since, many UK smaller companies funds have doubled, along with mining shares, emerging markets, and so on. We all expect the future to be a dull monochrome, but while looking back, the past has been full of incidents and surprises. 1993 was the time to invest in emerging markets, 1995-98 the time to be in an index tracker, biotechnology in 1995, technology and the internet in 1998-2000, the old economy, value and commercial property in the five years since 2000, smaller companies in 2003-2005. All of these fashions give us the potential to make returns of far more than 7 per cent a year.

I am always looking at trends. They start quietly, long before most investors notice, then they gain momentum. Eventually people start constructing theories to explain why the dominating trend will last forever, then suddenly it ends. It is just as easy to see these big trends from a PC in Chipping Norton as on a Bloomberg screen in the City.

George Soros once said the greatest mistake you can make as an investor is to have a good idea and not put enough resources behind it. I have made this mistake often enough. If you see real opportunities in Latin America, for example, it is no good increasing your fund weighting from 0.5 per cent to 0.75 per cent.

It is useful knowing the investors in your fund. I am friendly with most of the investors in our fund and some are relatives. Having followed the style over years, they know what to expect and are much more tolerant. People almost never take money out of our funds unless they want to spend it.

I think it is important to be constrained as little as possible by your investment remit. If you are a smaller companies fund, you cannot invest in banks because they are all in the FTSE 100. But if you are benchmarked to the FTSE 100 you cannot invest in housebuilders because there are none in the index. It is important to be able to invest where opportunities arise and hold cash without constraint when nothing looks attractiveTony Yarrow is a partner at Wise Investment


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