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By Victoria Kelly
Fidelity International isdeveloping a number ofproducts, tools and educationalcampaigns for the burgeoningpost retirement market, whichit believes will grow massivelyas life expectancy increases.
The group plans to leverageits experience in this area inthe US, where it offers itsFreedom fund of funds range.These funds use active assetallocation to meet the needs ofinvestors up to and afterretirement.
Michael Jones, head offinancial institutions atFidelity, said the traditionalapproach of saving untilretirement then shifting intolow risk assets such as cashand drawing an income wasless appropriate as people livelonger.
He said many peopleaccrued insufficient capital tolet them take a regularincome for the rest of theirlives if they invested in justcash or bonds afterretirement. Instead, theyneeded to stay invested inassets such as equities forlonger to meet their incomeneeds, he added.
Jones said: ‘We are workingtowards funds andproducts to helppeople create alifetime plan thatmoves away fromthe traditionalapproach of theaccumulation andde-accumulationphases and helpsthem accumulatewealth in lateryears.’
Fidelity manages threeWealthbuilder Target fundsdesigned to meet financialneeds on a specific maturitydate.
Jones said Fidelity wouldintroduce more funds as thepost retirement planningmarket grew. In the US,Fidelity has seen its Freedomfund range balloon from $4million (£2.3 million) under
management in1996 to $42billion today.
‘The Targetfunds have nottaken off in theUK yet but wewould expectthose funds tobecome muchmore relevant inthe years ahead,’Jones said.
www.citywire.co.uk 22 December 2005
by Patrick Sherwen
There is no point trying to deny it any longer, this isthe last edition of Citywire Courier until next year.
I know, I know, how will you cope until Januarywithout the latest moves and news that the fundmanagement industry tries so hard to keep underwraps and we try so hard to uncover?
Well, as we enter the season of goodwill wethought it might be appropriate to give the fundmanagement industry a break from our scrutiny. Itcannot be easy after all to be under constantpressure from the likes of us to get yourinvestment decisions right, recruit good managers,
pay them a sensible wage, generate healthy profits,run a clean ship and pull in noteworthy backers.
Some interesting stuff has passed through thiscolumn during the year. One prediction that hasalready come to fruition was former Jupiter starWilliam Littlewood’s return to the investmentindustry, as manager of a hedge fund. On otherswe are still waiting to hear the end of the story:John Ions and Mike Webb’s planned boutique,New Star’s takeover, Invesco Perpetual’smanagement buyout to name a few. There isplenty to look forward to in 2006. MerryChristmas and a happy New Year to you all.
Merry Christmas – yes, even to fund managers
Managers warn of
Japanese correction
The unanimous conclusion of a
recent Japanese review conducted
by Credit Suisse’s respected fund of
funds manager, Rob Burdett, is that
the Japanese market is in need of a
correction to secure its long-term
prospects.
Burdett said all the Japan
managers he and his team
interviewed, who expressed an
opinion on the prospects of the
market, agreed that a short-term set
back was in investors’ best interests.
According to the managers
Burdett said: ‘It would be extremely
healthy to see a correction for the
longevity of the recovery.’ He added:
‘In the 12 months from here people
will make money in Japan, but it may
be worth taking a bit off the table.’
He said: ‘A number of managers
said there were a number of stocks
that were overbought… To allow
long-term investors to perform well,
this indiscriminate buying needs a
bit of a shock.
‘It could be in the next few days or
the next few months, but all the
arguments are that it would be very
rational otherwise [the market]
could be over-extended…a number
of managers are looking for a 10 to
15% correction.’
Funds groups that were part of
the recent quarterly review
included: Atlantis Fund
Management, BDT, JPMF, Martin
Currie, Morant Wright, Schroders, JO
Hambro, Odey Asset Management
and Legg Mason.
Japan has emerged as a favourite
investment area for fund of funds
over recent months.
Latest scandal sees property funds come
under scrutiny – p3
Carphone deal delights management trio
– p3
Spotting next year’s talent – now – p4
FrontRunnerFrontRunner
Fidelity targets post retirement market
Jones: new approach needed
Winners of theIMA Team Award
for Excellencein InvestmentWriting 2005
First for fund manager performance, news and analysisFirst for fund manager performance, news and analysisNº 98
SPECIAL SITUATIONS FUND
hunting is a different style of Profit
hunting altogether.
As the name implies it’s a specialist
skill. Instead of shooting on sight this
hunter plays the canny, long game.
Searching for Profits that other
hunters have left for dead but are in
fact not as doomed as they look.
You see, in talented hands, even these
suffering specimens can come good.
Blossoming into strapping, sought-
after monsters.
176% GROWTH†
In Derek Stuart’s hands, a Special
Situation Fund Profit has become
mammoth. Growing a mind-boggling
176%, making it number one in the
sector since launch.
Yet this Citywire AA rated ace is just
37. What, then, is his secret?
DEREK’S HUNTING TECHNIQUES
For Derek it’s good old fashioned leg
work. Traditionally that’s meant
talking to resuscitation experts on the
ground amid the fledgling companies
of Small and Mid Cap. But recently
he’s been spending more and more
time in the FTSE 100, picking off
Large Cap Profits that short sighted
hunters have written off prematurely.
If you’d like to join Derek in his hunt
for healthy Profits why not get in
touch. You’ll find all the contact details
you need below.
The three steps to successful
SPECIAL SITUATION Fund hunting.
Step 1: Find a PROFIT on its last legs
Step 2: Watch it recover and grow
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FOR PROFESSIONAL ADVISERS ONLY. Issued by Artemis Fund Managers Limited which is authorised and regulated by the Financial Services Authority and is a member of the IMA. Artemis Fund ManagersLimited is a member of the Artemis Marketing Group. We only market our own unit trusts. †Source: Lipper Limited, bid to bid, net income reinvested 09/03/2000 to 30/11/2005. CFI/20/12/AA
Telephone: 0800 092 2090 E-mail: [email protected] Website: www.artemisonline.co.uk
NEWS
Scandal sees property funds under scrutiny
by Graeme Davies
Monday’s move by CarphoneWarehouse to snap up two fixedline telecom rivals, making it thenumber two to BT in the UK,won instant approval frominvestors as its share price hit afive-year high. Among those fundmanagers benefiting were OldMutual’s Ashton Bradbury, MarkTyndall of Artemis and Fidelity’sGraham Clapp.
All three managers havebought in this year as investorshave pushed Carphone’s sharesfrom 147p to 259p with asignificant rise recorded in recentweeks.
A-rated Bradbury bought 1.37million shares on behalf of his
Old Mutual UK Select Mid Capfund in mid-June when theshares were changing hands for175p. Bradbury offloaded a fewshares in early October whenthey had risen to 192.5p butretains 1 million shares.
AA-rated Tyndall made hismove in the first week ofNovember when Carphone’sshares were 213.5p. His ArtemisCapital fund holds 2.3 millionshares.
Clapp was also buying inNovember on behalf of hisFidelity European Growth fund.He first bought at about 215.5p,adding as the share price rose to224p in late November. Clapp’sfund holds 5.2 million shares.
Carphone’s purchase ofCentrica’s OneTel unit and Tele2’sUK and Ireland businesses willboost its fixed line customernumbers to 2.4 million, giving itabout 10% of the UK market andmaking it the clear second to BT.The new customers will bebrought into its TalkTalkbusiness.
The move ramps upCarphone’s fixed line businessand also gives it a larger customerbase to target with its broadbandexpansion plans. It wants tospend £10-15 million a year overthe next three years unbundlinglocal exchanges, thus wideningthe number of customers towhom it can offer broadband.
Carphone deal delights management trio
www.citywire.co.uk 3 22 December 2005
Performance Highlights
Cavendish recruitshigh profile non-exec
Fund management boutique
Cavendish Asset Management,
has recruited Credit Suisse’s
former head of European equities
as a director, writes Algernon
Craig Hall.
Stephen Goldman, who left
Credit Suisse earlier this year,
took up a non-executive position
on the firm’s four-man board at
the start of the month. Goldman’s
near 35-year investment career
has seen him work long stints at
Rothschild Asset Management
and JP Morgan Investment
Management before he moved to
Credit Suisse in April 2000.
Cavendish director, Michael
Rosehill, told Citywire:
‘[Goldman’s appointment] reflects
the fact that we have grown as a
business and we need the advice
and input of a seasoned,
respected investment manager on
the board.’
Rosehill said the appointment
was not a precursor to any
specific product rollouts.
He added: ‘We'll be looking for
organic growth. We’re staying
focused on what we have been
doing.’ A key focus of the
business is on the talents of star
Citywire AA-rated fund manager
Paul Mumford, who manages the
Cavendish Opportunities fund.
Cavendish Asset Management’s
2004 results contained the
comments: ‘the directors consider
the results for the year disap-
pointing’ but Rosehill said he has
been pleased with 2005.
Performance Highlights
by Gavin Lumsden
The scandal surroundingDeutsche Bank’s decision tofreeze a €6 billion (£4.1 billion)property fund last week raisesquestions about the suitability ofopen-ended investment funds asa way of investing in property,says Patrick Sumner ofHenderson.
Media reports that Deutsche’sproperty investment arm wasrevaluing the portfolio of theGrundbesitz-invest fund,following sustained marketdeclines, scared Germaninvestors and caused a run onthe fund. DB Real Estateresponded by closing the fund tonew investment and preventingits 300,000 shareholders fromselling their holdings.
An independent valuation isexpected to be completed at theend of January at which pointthe fund may be reopened.
The move has caused a stormin Germany and is the country’s
second property fund scandal ina year. In 2004 DekaImmobilien, another large fund,suffered massive outflowsfollowing allegations of seriousirregularities and the resigna-tions of senior executives.
Private investors are shockedas many sought refuge inproperty funds after beingburned by the stockmarket crashin 2000. German fund managersfear Deutsche’s debacle coulddamage their industry and havequestioned why the bank frozethe fund so quickly given that itsliquidity levels lookedgood.
Sumner, director ofproperty at HendersonGlobal Investors, saidthe same scandal couldnot happen in the UKbecause thefundamentalproblem isthe Germanvaluat ion
methodology. Germany uses a‘net income value’ method thatessentially tries to smoothportfolio values. This is incontrast to the UK where theRoyal Institute of CharteredSurveyors’ ‘Red Book’ obligesfund managers to value theirfund on market prices.
Sumner, who managesHenderson Horizon Pan-European Property Equities,also believes the crisishighlights the dangers of open-ended funds. ‘Money is comingin faster than managers can
spend it, therefore theyhave to buy poorquality property andget money into themarket and you haveto be in property and
not cash to get the yield.So there is a
moral hazardof gettinginto themarket.’
NOT A LOT OF PEOPLE KNOW THAT...…F&C hosted its Christmas pressdinner at Caravaggio, a popular noshhouse in the City. Those lucky enoughto attend were given nice little leather-bound copies of the Harden’srestaurant guide to take home withthem too. However, those who took thetrouble to look their venue up will havefound it received the worst possiblerating for food, service and ambienceand some pretty damning commentstoo. Perhaps F&C should have read itbefore making the booking.
Sumner: sees danger in open-ended funds
NEWS ANALYSIS
22 December 2005 4 www.citywire.co.uk
Investors eager to keep an eye on emerging talentwill be interested to hear Citywire has identifiedseveral managers who look set to gain their firstratings in 2006 for their consistently above averagerisk adjusted performance relative to their peers.
The mix of disciplines is varied. One fundmanager runs European excluding UK equities,another runs Pacific Basin equities. There is a splitcapital investment trust specialist and also a multi-manager.
These managers have been identified as possiblecontenders for a Citywire rating next year becausethey have demonstrated strong risk adjustedperformance against their peers over the last 27months. Managers need a track record of at least 30months to be considered for a rating. This means iftheir present record continues they are well placedto receive a rating in early 2006.
Niall Gallagher, manager of the Merrill LynchEuropean Dynamic fund, is an up-and-coming starworth watching in the Europe excluding UK sector.
Gallagher joined Merrill Lynch in 1998 and cut histeeth over the next five years on the group’sEuropean and global desks. During this time he ranEuropean and Irish portfolios, researched globalfinancial stocks and gained experience in portfolioconstruction.
In September 2003, Gallagher was handed thereins of the European Dynamic fund, a punchyportfolio that gives him the freedom to go whereverhe feels there is opportunity. It is his track record onthis fund during the last 27 months that puts him inposition to gain a rating if his performancecontinues.
Gallagher, who began his career as an economistwith the Bank of England in 1995, holds between 30and 50 stocks in the fund, of which the top 20account for about two thirds of the portfolio.
Stocks are bought with a two-year investment
Spotting next year’s talent – nowWith the New Year approaching we take a look at Citywire’s unique fund manager
database to see which up-and-coming stars are set to make their mark in 2006.
horizon in view as he believes it can take time for the market to recognise the full valueof a company. Key themes he looks for in a company are restructuring opportunitiesthat could add value, an undervalued share price combined with identifiable catalystsfor growth and earnings growth that is undervalued by the market.
Finally, Gallagher uses a sophisticated risk model as an overlay on the fund to mitigaterisk implicit in the portfolio, such as a bias towards a specific economic theme, sectoror currency.
Another manager who might be eligible for a coveted rating next year if presentperformance continues is split capital investment trust specialist Paul Craig of New Star.
Craig joined New Star in September 2003 when the group’s founder John Duffieldacquired 13 unit trusts from Exeter Investment Group. The majority of the fundstransferred with the deal, about 80%, invested in investment trusts including split-caps.
Since then, Craig’s fund responsibilities have broadened and he now runs four fundsinvesting predominantly in investment trusts for the recently floated group. Theseinclude the Global Strategic Capital, UK Strategic Capital, UK Strategic Income and theDiversified Strategic Capital.
When Craig arrived at New Star in the autumn of 2003 split capital trusts wereundervalued as investors spurned them in the wake of the collusion scandal that hadbrought the sector down two years earlier.
However, shrewd investors like Craig, who uses a bottom up approach to pick trusts,believed the sector would recover if stockmarkets stabilised after the steep falls of 2001to 2003. His belief appears to have been vindicated and the sector has enjoyed a strongbounce back. Furthermore, the zeros sector, in which the split capital investment trustsinvest, remains robust.
Other managers who could gain a rating from Citywire next year include F&C PacificGrowth manager Mark Williams and T Bailey’s Jason Britton, who runs its Growthmulti-manager portfolio.
F&C’s Williams has worked his way up to his present position of lead manager on thePacific Growth fund since joining the group in 1997. A graduate of CambridgeUniversity, Williams was given his first fund management role in 2000 and took fullcontrol of the fund in September 2003.
by Victoria [email protected]
Tota
l Ret
urns
(%)
IMA Europe Excluding UKNiall Gallagher
-10
0
10
20
30
40
50
60
Nov-05Aug-05Aug-04Aug-03
Gallagher’s astute handling of Merrill Lynch’s European Dynamic fund sees him on the verge of
his first Citywire rating Source: Lipper
