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Steer by the stars

Tim Steer is one of the few fund managers to come out of New Star’s troubles with his reputation fully intact.

With a strong track record on his £213.8m UK alpha fund and £159.6m Gemini hedge fund, it appears he has everything going for him ahead of the planned acquisition of the firm by Henderson. The UK alpha fund is second quartile over five years in the UK all companies sector.

Steer attributes his fund successes in the past decade to an ability to switch tack when the need arises. He took a degree in biochemistry before travelling the world for seven years as a roadie, working for legends such as Pink Floyd, U2 and The Jam.

Steer recalls staying in the same hotel room within weeks on world tours and says it became a turning point. “It was in Brussels on a Meatloaf tour and I remember taking a photo and writing some graffiti on the wall and I returned four weeks later with another band and ended up in that exact same room. I looked at the graffiti and what it said made me recognise that after seven years it was time to move.”

He qualified as a chartered accountant and spent five years at Ernst & Young, covering several areas, including fraud investigations. He moved to Merrill Lynch, which is where he honed his skills as head of pan-European mid-cap research on areas such as company balance sheets.

“What it allowed me to do, and this is rare, is move from sector to sector, depending on where the sex was, so I jumped from environmental stocks to cyclicals, etc. This is why I feel I have been a successful fund manager as so many people have had to specialise. I remember once being offered the role of global cement analyst and I was horrified.”

One of Merrill Lynch’s biggest clients was Alan Miller, who was at Jupiter at the time, and it was Miller who told Steer about John Duffield’s New Star Asset Management.

Steer says the environment suited him. The launch of his UK alpha fund launch came in 2001 as a mid-cap fund but that strategy has since changed.

Steer believes change was crucial as he feels any fund manager can succeed if a strategy is around for long enough, as it will eventually come into fashion. “Eventually everyone will get it right for a period and history in this industry dictates that happens before it disappears. The good managers are those that change according to environment. In the last seven years, we have moved from mid cap to large, moved from UK to overseas earners and now we have moved to defensives, having traditionally been growth-orientated. You only have to look at today’s environment to see that borne out.”

Steer also manages the successful Gemini hedge fund. At one point, both funds looked set to be closed to new investment but Steer says the change to large-cap focus – the UK alpha fund is now over 50 per cent invested in the FTSE 100 – has allowed him to run the funds without capacity constraints.

His process is built upon three pillars – themes and trends, accounting and Merge, a proprietary screening tool which ranks funds through the categories of Multiples, Essence, Revisions, Growth and Energy.

“It is also useful to tailor for particular market conditions, for example, we want to stay away from those areas that are highly leveraged so we use the tool to identify and avoid them.”

Steer says he will stick with large caps in 2009 and that for the first half of the year refinancing is the order of the day.

With the imminent takeover of New Star, Steer says although he has had a good set of initial discussions with Henderson, he is keeping his options open.

Steer recently gave up his role as coach of the under-19s rugby team at Rosslyn Park in South-west London. “It was the end of an era after completing a recent tour to South America, with a number of the team members moving on soon after.

“Looking to the future, I hope to be running money for around five more years as, rather than feeling the stress some may assume, I actually enjoy it. However, I think a new hobby may well need to be found in that time now that the rugby has finished its course.”

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