Star Fund Managers

Life beyond the stars 16 July 2014

2

Summary.…

Funds run by ‘star managers’ typically continue out-performing after the star departs

A firm’s culture is critical – key attributes sustain post-handover, e.g.

− ‘Star managers are not islands – they are supported by a team of analysts

originating ideas and technical valuations

− Such teams often remain in place after a star’s departure

− Firms take trouble to mentor younger talent and create tomorrow’s stars

Firms also have other attributes which sustain after a manager’s exit:-

− Investment philosophy

− Process

− Global research and ideas

Where entire investment team’s do leave, firms have every incentive to replace with top

manager talent

3

New managers typically continue their predecessor's out-performance ….

Fund Star Manager

Start Month

End Month

% pa growth

Vs benchmark

New Manager

% pa growth

Vs benchmark

Fidelity Special Situations Anthony Bolton Dec-85 * Jan-08 5.3% Sanjeev Shah & Alex Wright 1.9%

Schroder UK Alpha Plus Richard Buxton June-02 June-13 4.1% Philip Matthews 2.8%

Liontrust UK Growth Jeremy Lang Apr-96 Mar-09 1.8% Anthony Cross / Julian Fosh 2.6%

Henderson EU Select Opportunities Roger Guy Dec-93 Jan-10 3.8% John Bennett 2.2%

Schroder European Opportunities Chris Rice Dec-02 June-13 0.9% Steve Cordell 5.3%

Jupiter European Special Situations Leon Howard-Spink Apr-01 July-05 6.4% Cedric de Fonclare 1.6%

Axa Framlington UK Smaller Companies Rodger Whiteoak July-01 Feb-08 8.2% Henry Lowson 2.3%

Schroder Tokyo Dennis Clough June-89 Mar-04 7.0% Andrew Rose 0.8%

Schroder Income Nick Purves Oct-03 May-10 2.2% Nick Kirrage 1.8%

Jupiter Financial Opportunities Phillip Gibbs June-97 Oct-11 12.4% Robert Mumby -2.4%

Fidelity European Tim McCarron Jan-03 Sept-09 0.8% Samuel Morse -0.6%

* The fund started in 1979, but Aegon has data since 1985

4

Fidelity Special Sits has out-performed by 2% pa since Bolton departed .…

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Anthony Bolton FTSE All-Share TR

-40

-20

0

20

40

60

80

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Post Bolton era (Sanjeev Shah & Alex Wright) FTSE All-Share TR

Fidelity Special Sits 1985-2007 Fidelity Special Sits 2007-14

Consistent application of contrarian / value approach over 1979-2014, e.g.

− Courage to not join the dot com party in 1999-2000

− Bold positions built in financial sector over 2010-11

− backing domestic recovery stocks over 2011-13, e.g. house builder Redrow, when forecasters predicted poor economic recovery in the UK

Active mentoring of more junior managers by Anthony Bolton

Patience to accept periods of under-performance, e.g. 1998-99, 2011

Source:- Lipper

5

Schroder UK Alpha Plus:- out performance since Buxton departed .…

-50

0

50

100

150

200

250

300

Richard Buxton FTSE All-Share TR

-2

0

2

4

6

8

10

12

14

16

18

Post Buxton era (Philip Matthews) FTSE All-Share TR

Schroder UK Alpha Plus 2002-13 Schroder UK Alpha Plus 2013-14

When Buxton left, Schroder replaced one proven fund manager with another:- Philip Matthews joined from Jupiter

High conviction fund with ~ 55 holdings

Decisive action taken over 2013-14 to drive performance through the market cycle:-

− Reduced aggregate domestic cyclical exposure of the fund in 2013

− Raised holdings of mega caps during 2013-14, e.g. Shell, Glaxo, BP, HSBC

Source:- Lipper

-2.0

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

Schroder UK Alpha Plus Old Mutual UK Alpha

6

…. and broadly in line with Buxton’s new OMGI fund

Schroder UK Alpha Plus & Old Mutual UK Alpha 2013-14

Source:- Lipper

7

Liontrust UK Growth:- investors would have done well to stay put after Jeremy Lang departed .…

0

50

100

150

200

250

300

Jeremy Lang FTSE All-Share TR

0

20

40

60

80

100

120

140

160

Anthony Cross / Julian Fosh FTSE All-Share TR

Liontrust UK Growth 1996-2009 Liontrust UK Growth 2009-14

Liontrust was eager to replace star manager Jeremy Lang with top talent when he left in 2009:-

− Anthony Cross had been at Liontrust since 1997 developing a distinct investment process

− Anthony and Julian XXX have over 50 years’ combined investment experience – 40 years when they took over the fund

They have applied the ‘Economic Advantage’ investment process, designed to identify businesses with high barriers to competition:- intellectual property,

strong distribution channels, or high levels of recurring revenue (70%+)

Intellectual conviction enabled them to spot exciting companies with these attributes before the general market got excited, e.g. Rotork, Rightmove, Compass

Source:- Lipper

8

Henderson EU Select Opportunities:- no need to panic when Roger Guy departed ….

0

100

200

300

400

500

600

700

Roger Guy FTSE World Europe ex UK TR GBP

-20

-10

0

10

20

30

40

50

60

70

John Bennett FTSE World Europe ex UK TR GBP

Henderson European Select Opportunities 1993-2009 Henderson European Select Opportunities 2009-14

Source:- Lipper

9

Schroder European Opportunities .…

-20

0

20

40

60

80

100

120

140

160

180

200

220

Chris Rice FTSE World Europe ex UK TR GBP

-5

0

5

10

15

20

25

Steve Cordell FTSE World Europe ex UK TR GBP

Schroder European Opportunities 2002-12 Schroder European Opportunities 2002-12

Source:- Lipper

10

Jupiter European Special Situations .…

-50

-40

-30

-20

-10

0

10

20

30

40

50

Leon Howard-Spink FTSE World Europe ex UK TR GBP

-20

0

20

40

60

80

100

120

140

Cedric de Fonclare FTSE World Europe ex UK TR GBP

Jupiter European Special Situations 2001-05 Jupiter European Special Situations 2005-14

Source:- Lipper

11

Axa Framlington UK Smaller Companies .…

-50

0

50

100

150

200

Rodger Whiteoak FTSE Small Cap (X It) TR

-60

-40

-20

0

20

40

60

80

100

120

Henry Lowson & Chris St John FTSE Small Cap (X It) TR

Axa Framlington UK Smaller Companies 2001-08 Axa Framlington UK Smaller Companies 2008-14

Source:- Lipper

12

Schroder Tokyo .…

-60

-40

-20

0

20

40

60

80

100

120

Dennis Clough Topix TR

-20

-10

0

10

20

30

40

50

60

70

80

Andrew Rose Topix TR

Schroder Tokyo 1989-2004 Schroder Tokyo 2004-14

Source:- Lipper

13

Schroder Income .…

0

10

20

30

40

50

60

70

80

90

100

110

Nick Purves / Ian Lance FTSE All-Share TR

-10

0

10

20

30

40

50

60

70

Nick Kirrage FTSE All-Share TR

Schroder Income 2003-10 Schroder Income 2010-14

Source:- Lipper

14

of course

not all funds continue to out-perform ….

15

Fidelity European .…

-20

0

20

40

60

80

100

120

140

160

180

200

Tim McCarron MSCI Europe ex UK TR USD

-20

-10

0

10

20

30

40

50

Samual Morse MSCI Europe ex UK TR USD

Fidelity European 2003-09 Fidelity European 2009-14

Source:- Lipper

16

Jupiter Financial Opportunities .…

-100

0

100

200

300

400

500

600

700

800

900

1,000

Phillip Gibbs MSCI ACWI/Financials TR

-10

0

10

20

30

40

50

60

Robert Mumby MSCI ACWI/Financials TR

Jupiter Financial Opportunities 2003-11 Jupiter Financial Opportunities 2011-14

Source:- Lipper

17 Source:- Lipper

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