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Open letter to Dampier stokes private equity debate

Advisers have rallied behind Hargreaves Lansdown head of research Mark Dampier after a spat developed between himself and cru chairman Jon Maguire.

Maguire was not best pleased with Dampier’s comments over his firm’s CF Arch cru portfolio, which has made a return of almost 7 per cent in volatile markets over the past 12 months.

Despite its success, Dampier refuses to recommend the fund, believing it to have a number of issues hanging over it, particularly with regards to its private equity content.

He says: “It invests in private equity and I don’t see why that’s immune to a downturn, so I have a questionmark over this fund. People need to be very careful that they don’t just buy into top-performing funds without understanding their underlying philosophy.”

Within a matter of hours Maguire had responded issuing an open letter to Dampier, stating that the pre-IPO market has some “absolute diamonds” in it, “backed by owners of businesses who understand that you do not sell into public markets when your profits are enjoying a vertical take-off.”

I think most people see what Maguire is getting at.

He continued: “I would like you to answer me one simple question; What year would you have bought shares in Hargreaves Lansdown? From incorporation to listing, name me the year.

“We are very gifted at getting this answer right, which is why our performance leaves the competition for dead.”

Dampier agrees that firms do look better pre-IPO but seeing as private equity does not have a market valuation, there is a gap in knowledge.

Perception Support director Phil Billlingham says the IFA is responsible for selecting a sensible and safe home for clients money, and is the first port of call when things go wrong.

He says: “Mark is an extremely experienced IFA, and I’m sure that he, like me, is less than impressed by a defence of the fund which is summed up as ‘We are extremely gifted at getting this answer right’.

“Leaving aside that this ignores the original question, I seem to remember hearing similar arguments from other fund managers in the past, some of whom failed in spectacular fashion.

“IFA’s owe a duty of care to their clients is to look carefully under the bonnet of any potential investment. I would not invest in this fund until I fully understood the investment mechanism, the current asset allocation, how internal valuations are carried out, and the situation in terms of liquidity if there are significant net outflows. Others must make their own informed judgments.”

Chelsea Financial Services managing director Darius McDermott says: “The fund invests in a number of Arch strategies but before I recommend it I need to know what is going on in the fund. It has done well but we are neither positive or negative on the fund.”

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