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Paul Farrow: After a bright start, Neptune’s light has faded

It wasn’t so long ago that Neptune’s Robin Geffen was more than happy to feature in the press to advertise his company’s wares. He loved to re-tell tales of visiting Russia and popping into local shops to discover what they were selling. One of his favourite stories appeared to be the one about seeing 17 different types of imported beer a year or two back, which told him the country was enjoying a consumer boom even though the oil sector was having a detrimental impact on Russian stocks at the time.

Step forward his Greater Russia fund and the early indications suggested that the fund management sector had landed another group star with a planetary reference, such was its performance and pulling power.

Not that everyone was sure that Neptune would takeover Jupiter’s (or New Star in the early years) mantel. Cynics questioned whether it could sustain its strong performance and if it would lose its way by launching too many funds too quickly.

Having launched in 2002, it now has 29 funds, having added 15 since 2007. Some financial advisers along Neptune’s journey have questioned whether it needs that many funds – half of which are less than £13m in size. Not surprisingly, comparisons have frequently been made with the fallen fund manager New Star.

John Duffield’s company attracted billions of pounds from enthusiastic investors within no time but it soon began to lose its aura as it ballooned in size. It then made some ill-timed fund launches, before spiralling debts left it with little choice but to be taken over.

But Neptune has outlived New Star, and while John Duffield has been quietly trying to start a new fund business, Geffen has been popping the champagne corks to celebrate Neptune’s first decade. Assets under management have swelled to more than £6bn and it has more than 100 employees.

On reading its press release to announce its anniversary I was taken by a statement made by Geffen – and it makes me wonder whether he has changed his philosophy on building a fund management business.

In 2007, when I interviewed him from his Hammersmith-based boardroom, with the newly completed Wembley stadium on the horizon, he was quick to distance himself from the likes of New Star, saying that Neptune did not embrace the cult of individual star managers. “I was keen to step away from the culture of the star fund manager,” he said.

Yet now he is boasting: “I believe we will see Neptune’s philosophy of home grown talent really take hold, with many more of our fund managers becoming industry names over the next decade. I believe the breadth and depth of talented individuals right across the business is truly humbling.”

That sounds like someone who is doing anything but distancing themselves from building a team of star fund managers.

And what of performance? Early bird investors will be sitting pretty. According to Morningstar, eight of its 11 funds with a seven-year track record are first quartile performers. These include, Global Equity, Russia & Greater Russia, US Opportunities and European Opportunities.

But its more recent track record is not nearly as impressive. Six of its eight biggest funds have underperformed their average over the past 12 months, with half a dozen funds in the fourth quartile. Over three years, four have underperformed the average, with three in the bottom quartile – and just one (Russia) in the first. Global Equity, which is its second biggest fund at £953m, is ranked fourth quartile over one, three and five years now. Other funds that have lagged considerably against their peers of late, include Neptune India and Neptune Emerging Markets.

Neptune had an astronomical rise during its early years, but it seems to me as though it is falling back to earth with a bump.

Paul Farrow is personal finance editor at the Telegraph Media Group


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