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Troy’s thoroughbred

Few fund houses can claim to be named after a horse but Troy Asset Management’s inspiration boasts a victory in the 1979 Epsom Derby.

The group was founded in 2000 by the horse’s owner Lord Arnold Weinstock, seeking a home for his family wealth that focused on capital preservation rather than the whims of the market.

Weinstock ran GEC – which later become Marconi – in the 1990s and it was there he met pension fund manager Sebastian Lyon. The two had many ideas in common about running money and Weinstock eventually asked Lyon to set up Troy and put this absolute return approach into practice.

He launched the group’s first fund, Trojan, in 2001, establishing a basic ethos of focusing as much on downside risk as upside potential.

As a basic rule, stocks likely to lose as much or more than they could gain are unlikely to feature in the portfolios.

Trojan is a balanced fund, with a core of defensive UK equities plus allocations to overseas shares, index-linked bonds, cash and gold.

Over the last year, the fund has managed to remain in positive territory, boosted by a 40 per cent position in foreign currencies offsetting the drop in UK equities.

As the group developed, Francis Brooke joined from Merrill Lynch, where he also ran a large pension portfolio, launching the second flagship fund, Trojan income, in 2004.

Again, the income portfolio has been a top performer since launch, growing its dividend each year despite recently moving into the lower-yielding UK equity income & growth sector.

Brooke feels many high-yielding funds will struggle to maintain their dividends without compromising capital.

Troy’s approach centres on valuation, with the managers unwilling to pay up for stocks and typically looking to buy them at a low point.

Even the best companies fall out of favour and the team has snapped up giants like Vodafone, Shell and Unilever in recent years.

They focus on such quality stocks, typically at the larger end of the market, meaning the funds have lower volatility than their peers.

Favoured holdings are typically stable or growing companies with differentiated products or services and a strong balance sheet that can support a growing dividend stream throughout the cycle.

Another key element of the Troy mantra is running focused portfolios, with around 30 stocks in Trojan and 40 in the income fund. Overall, the group’s approach typically means it will not keep up with strongly performing markets but outperforms against a weak background.

Over its eight years for example, Trojan has produced annualised returns of 8.5 per cent while the FTSE all-share has actually made nothing.

Key to this low-volatility approach is investors understanding what the managers do and they are keen to grow sustainably. Around two-thirds of the money in Trojan is from external investors for example, but the group has avoided listing on mainstream platforms and has never sought out fickle fund of funds.

So far, the group has added its funds to smaller platforms, including Novia and Hargreaves Lansdown’s Vantage.

Its ethos is that it is better to have £1m for 10 years than £10m for a year, so is is slowly building assets as performance continues to draw attention.

The group has maintained a transparent charging structure, skewed towards fee-based intermediaries. There are no initial charges on the funds, with a 0.5 per cent dilution levy in place for buying and selling. Most investors pay the 1 per cent annual charge, although there is a 1.5 per cent AMC available for intermediaries to factor in trail if necessary.

Apart from the flagship funds, Troy also has a more volatile capital vehicle run by Lyon and Brooke, plus a fund of funds. They all work across the mandates and share stock ideas and analysis, with 22 holdings currently in common between the three portfolios.

Meanwhile, Lyon also won the mandate for the Personal Assets investment trust earlier this year, after previous manager Ian Rushbrook passed away.

In terms of corporate structure, the Weinstock family were initially the majority players in terms of capital and assets, but equity has gradually migrated to Troy staff. At present, the family retains just over half the equity, with Lyon, Brooke and chairman Simon de Zoete owning the rest.

Troy remains small with just nine staff from September but from an initial £35m of family money invested in the Trojan fund, it has grown to manage £850m across various mandates.


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