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New ideas

Best ideas funds are proving popular and more are on the way. Chris Salih reports

Just over 15 months ago Skandia announced that it planned to launch a global best ideas fund, featuring 10 managers and their 10 best ideas.

The notion met a mixed response. Some were quick to point to the ability to access the best positions across a range of talented managers, while others saw the move as nothing more than a marketing gimmick.

Over a year on and Skandia has seen the fund bring topquartile returns, with the £426m vehicle placed eighth out of 63 in the IMA global growth sector from launch to date.

Skandia followed up on its success with the launch of a UK vehicle, only to be pipped to the post by Rensburg, which launched its own version, the Rensburg UK managers growth trust, in September 2006.

With both these products also offering strong returns, it is no surprise that a further three are set to hit the shelves this year, including Skandia’s long/short vehicle.

Hargreaves Lansdown senior adviser Ben Yearsley says the success of these funds warrants new offerings in the market, though some may already be missing more traditional offerings that are essentially unconstrained funds.

He says: “There was a creeping indexation in the market and what best ideas have done is take the exact opposite stance by tapping into the best positions that managers can pluck from the market. Another positive on that front is that it makes the timing for bear and bull markets irrelevant.”

Yearsley says that some unconstrained vehicles, like Ed Burke’s UK aggressive fund, have been operating for some time under that banner.

“If you look at that fund, which launched at the start of the decade, you will see that it has consistently outperformed while at times holding as little as 15 or 16 stocks,” he says.

Not all these best ideas funds operate upon the same notion. For example, the Skandia vehicle operates on the outsourcing model while Rensburg gets exposure to small, mid and large caps from its UK managers Mark Hall, Colin Morton, Stuart Sharp and Paul Spencer running 25 per cent of the portfolio each.

Plan Invest Group joint managing director Michael Own believes these successes should be judged on an individual basis.

He says: “The performance of the funds typically reflects the strength of the respective house which has launched them. Skandia, for example, is built off the use of its outsourcing model while Rensburg has a UK team that most asset managers would be envious of.”

Skandia’s first two funds have pulled in a total of £693m but Owen says the long/short vehicle it launched this week has the potential to outstrip its predecessors due to the niche element that advisers may latch on to.

He says: “Traditionally, the biggest IFAs prefer to do their own multi-manager choices but the unusual nature of this vehicle means that using the likes of Cartesian could really bolster returns in differing markets.”

Skandia Asset Management division and SIML CEO Jamie MacLeod has big ambitions for the fund. He says: “Our new fund is the first of its kind for retail investors in the UK. Never before have they been able to buy an investment solution structured like this – one which lets them benefit from falling as well as rising shares.

“We are anticipating high demand for such an innovative solution and believe it will attract more than £30m from investors in its first month. For an entirely new concept in retail fund management, this will be a significant amount.”

The other funds will come from . Bailey and Martin Currie, which are launching a UK best ideas and unconstrained North American portfolio respectively.

T Bailey’s fund is set for an October 1 launch and will hold 10 underlying funds in equal proportions. The portfolio will focus on highconviction, unconstrained managers who typically hold 25-50 stocks.

Co-manager Jason Britton says the group is expecting strong support. “We are confident in our abilities and will be disappointed not to achieve our objectives comfortably,” he says.

Martin Currie will launch a North America alpha portfolio on November 19 under the management of Tom Walker. The fund will be a concentrated version of Walker’s £140m North American Oeic, holding 25 stocks with a bias to mid-sized companies.

Martin Currie managing director of marketing Andy Sowerby says the fund will look very different from the index. Walker runs a portion of Skandia’s global best ideas fund and Sowerby says he expects some of the holdings in that portfolio to appear in the alpha fund.

Lawrence House head of multi-manager funds Alan Stokes says: “I am not surprised that more of these funds are coming into the market as the stockmarkets are largely lying on their backs. The UK is 7 per cent below its peak while Japan is at one of its lowest points. That is not say that bottom-up stockpicking with conviction is a bad idea but these new funds need to be judged over time.”

Yearsley says: “The argument that they are a marketing gimmick has been disproven since those funds launched last year but these new vehicles need to be judged on the same premise. I am surprised that more have yet to be launched but we have to be weary of me too creeping into the market.”

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