The fund will invest in a portfolio of concentrated funds where the underlying managers are unconstrained by benchmark weightings and choose only their best 25-50 stock ideas.
T.Bailey has set two performance targets for the fund – to outperform the FTSE All-Share Index on a total return basis and achieve a first quartile ranking over rolling three-year periods.
When constructing the portfolio, the company will look for good long-term performance, a proven and repeatable investment process, an experienced manager and stable ownership of the investment group.
The initial line up comprises funds from F&C, Invesco Perpetual, Jupiter, Legal & General, Old Mutual, PSigma, RAB, Rensburg, Saracen and Schroders. This will be reviewed during monthly meetings.
Research, data and analysis from a range of resources will be reviewed and asset allocation changes may be made to the portfolio to enhance the returns. Face-to-face interviews with fund managers are also an important part of the screening and monitoring process.
T.Bailey says it is not the first investment group to launch a best ideas fund but it differs in that most best ideas funds have been structured as manager-of-managers rather than funds-of-funds. According to T.Bailey, the performance statistics show that fund-of-funds perform better than manager of managers.
It also believes the fund of funds structure is more flexible, enabling the fund of funds manager to react to market circumstances and replace underperforming managers more quickly.
However, it is possible to get a more concentrated portfolio through a manager of managers best ideas fund such as those offered by Skandia. Skandia’s portfolios contain 100 stocks because 10 managers each run 10 per cent of the portfolio. In contrast, T.Bailey’s will contain at least 250 so it will have to ensure over-diversifying