Global Investing

Josh Lyman and fund managers’ Gordian knot

“We got momentum, baby! We got the big mo!”

Josh Lyman in the TV series ‘The West Wing’ may have wanted it in a presidential election race, but what of fund management companies? Do asset managers want investors to buy and sell their products as the momentum of fund returns ebbs and flows?

I began wondering about this when faced with comments from two well-respected figures in the funds industry. First, Marcus Brookes, Head of Multi-Manager at Cazenove Capital, so no slouch when it comes to picking funds:

“Some fund managers’ and IFAs’ approach to picking funds is usually quantitative to begin with and it is obvious most guys begin with the stuff that has just done well. It also means you are discounting three-quarters of the sector.”

Next the thoughts of Edward Bonham Carter, Group Chief Executive of Jupiter Investment Management: “You shouldn’t seek that level of consistent outperformance, it doesn’t exist except as a statistical fluke… The industry is flawed, in my view, by implicitly promising or expecting that.”

From this perspective, one of the industry’s main shortcomings – the apparent promise of consistent outperformance by fund managers – becomes more intractable because it is accompanied by investors’ continued willingness to buy funds on this basis. Fund managers’ Gordian knot, if you will.

from Funds Hub:

Cazenove’s Russell eyes market turning point

Cazenove's Tim Russell, one of the UK's best-regarded fund managers, reckons cyclical stocks -- the winners in 2009 -- look expensive while defensives look cheap and says he may increase his bets.

RTR1WR9UHe gives the examples of Kazakhmys and GlaxoSmithKline, which are both on roughly 10 times earnings. Whereas Glaxo has tended to report results ahead of forecasts in recent years, Kazakhmys has tended to disappoint, he says.

The miner's results are less dependable and very reliant on commodity prices, meaning it should be on a p/e of around 6 times, he thinks.

from Funds Hub:

Light at the end of the tunnel?

rtxb5afThere's no shortage of bad news in the financial world at the moment.

But one top hedge fund manager believes that equities could soon be heading for a very sharp rally.

Cazenove's Neil Pegrum -- whose fund made 9.4 percent last year while markets were plummeting -- believes UK equities could soon be enjoying a "March 2003" rally.

While it seems a long time ago now after the market's recent woes, March 2003 marked the start of a 4-year bull market which took the FTSE 100 from less than 3,300 to more than 6,700 and saw clever stockpickers reap huge rewards.