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The mysterious affair of styles

Twelve months ago, I had the honour of penning my inaugural multi-manager column for Money Marketing. The brief was to provide an insight into the world of multi-manager, either on a technical matter or in relation to how multi-managers look at funds. Maybe even on a hot topic of the day. Since then, the number of contributors to this column has extrapolated almost as fast as the number of funds of funds has grown. Almost, but not quite.

Unfortunately, recent columns seem to have become subtle (or, in some cases, not so subtle) plugs for the authors’ own funds. In an effort to get to back to basics, I will attempt to get through the next 500 words or so without my marketing hat on.

I recently had the good fortune to interview Guy de Blonay, manager of the New Star global financials fund. Guy (if I may use his first name – I recently got into to trouble with one industry figure for using his Christian name so one cannot be too careful even in the 21st Century) has managed the £153m fund since its launch in December 2001.

The first thing that struck me was that this portfolio is a different shape to many I have seen. It contains 66 holdings but the top 10 account for around 40 per cent of the portfolio. Indeed, the biggest holdings are 6.3 per cent, 5.7 per cent and 5.6 per cent whereas the median holding is just 1 per cent of the fund and 17 holdings are below 0.5 per cent in size. This is a man of conviction, knowing exactly how much of a certain financial stock he wants to hold, prepared to give his most favoured ideas all the support they need while using the long tail of small positions as a nursery for his next themes.

Guy describes this approach as an efficient allocation of capital – a popular mantra but one that is seldom followed so decisively as with the New Star global financials fund.

Not far away in London W6, Robin Geffen follows a different style in putting together the portfolio of the Neptune income fund. The fund has 33 holdings – not 32 or 34 but 33 and always 33. All are equally weighted at 3 per cent each (1 per cent is lost in the roundings but you get the point). Like Guy, Robin follows his own particular methodology with commendable consistency.

Indeed, the Neptune income fund will even go as far as splitting the fund down to 11 “steady Eddie” stocks, 11 “hidden fruit” stocks and 11 “tactical play” stocks. Clearly, Robin is not making a value judgement between his very best ideas but, rather, he appreciates that the benefits of a disciplined approach outweigh those of providing most capital to a preferred handful of his selections.

It has certainly worked for the £250m Neptune income fund because it is ranked eighth out of 87 funds in the sector over the year to June 30, 2006 and is one of this year’s best performers to date.

Which method is right? Both funds have quite stunning performance figures, a clear process and are headed by talented managers. On that basis, both styles tick all the boxes.

Different styles, different approaches, but both work for different managers to the same end – performance. Somewhere between these two extremes lie many other funds without the discipline of Robin Geffen or the courage of their convictions like Guy de Blonay.

Perhaps the most important thing to learn from the above is the positive approach of investment houses which allow their star managers to manage money in their own way and how, like in many of the biggest firms, the imposition of a common house style and process across all products can stifle such ability. There, I didn’t mention any one of our three funds once. Oh drat. Jason Britton is fund of funds manager at T Bailey

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