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Strategic return

I wonder how many brokers recognise the name of William Littlewood. He was the star UK fund manager of the 1990s and is also probably the best fund manager I have ever met.

Mr Littlewood first came to notice in 1991 when he managed what was then a small income fund from a virtually unknown group called Jupiter. Over the next nine years the Jupiter income fund produced a return of 580 per cent, compared to 266 per cent for the sector average. Even Neil Woodford, today’s best-known fund manager and still a big favourite of mine, could not match that and delivered 342 per cent over the same period.

Littlewood left Jupiter at the end of 1999 and for a while I thought his talents had been lost to the fund management industry. However, four years ago he resurfaced at Artemis running a very small hedge fund, mostly of his own money, although I did invest a little of my own in it too. He got off to a bad start but the portfolio recovered well and over about three years he still made me money during tough market conditions.

I am delighted to see he has now returned to the retail market with the Artemis strategic assets fund. Its highly flexible structure allows Littlewood to harness his experience as both a brilliant long-only manager and as a hedge manager. I also think this is the perfect time for a fund that can go anywhere in search of the best returns.

Asset allocation is a nightmare right now. Assets that may be good for the next six months will not necessarily be good for the next five years. In other words, the philosophy of buying and holding for the long term seems under threat. In this new fund, Mr Littlewood will invest in a wide array of assets encompassing shares, bonds, commodities, cash and currencies. The extra nuance on the fund is that William will also be able to go short, allowing him to make money when prices fall.

At present, Mr Littlewood’s views are not that dissimilar from Neil Woodford of Invesco Perpetual. That is to say, he thinks the present recession will last longer and will be deeper than anything we can remember. Conversely, when a recovery does come, he thinks it will be sharp and quick and those left holding defensive assets could well be left behind. This fund gives him the flexibility to make that switch to a more aggressive portfolio when he feels the time is right.

The fund will have roughly 35 per cent of its money in UK and international equities and 15 per cent in commodities, with gold at 7 per cent being the largest weighting. Currency investments will make up 25 per cent, including a long position in Canadian dollars. More interestingly, Littlewood believes that government bonds are an accident waiting to happen and he will be 20 per cent short of UK and US gilts. The fund will start with about 45 per cent in cash, which not only is a defensive position but also gives him the liquidity to suddenly pounce on an asset class as opportunities develop.

The fund will clearly have a degree of short-term volatility and it will not necessarily behave in a similar way to the general stockmarket. However, I am strongly of the view that it is ideally suited to today’s more difficult environment. It should strike a chord with private clients too, who I feel want a more actively managed offering. I am convinced of William Littlewood’s ability and pleased that he is working at one of the UK’s top investment houses at Artemis.

Finally, very welcome indeed, is the fact that the fund comes with a straightforward annual management charge of 1.5 per cent – there are no performance fees, which in many cases verge on the extortionate. I believe this is the fund launch of the year and I will be backing it strongly.

Mark Dampier is head of research at Hargreaves Lansdown

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