The Guardian - If you can keep your head...
October 19, 2011
What does the
plunging stock market mean for you? As the financial crisis bites hard, Patrick
Collinson picks the winners and losers among top fund managers
stock market has had its worst three months since the dotcom bubble burst 10
years ago. More than pounds 200bn has been wiped off the value of the UK's
biggest companies since July - which translates into a 15% cut in the value of
many people's pension pots and investment Isas.
Yet despite the
gloom, some funds have avoided the slump. Neil Woodford of Invesco Perpetual,
who manages more money on behalf of small investors than anyone else in the UK,
has had a good crisis; so has Terry Smith, whose asset management company,
Fundsmith, is still up since its launch a year ago, when almost everything else
is down. Meanwhile, Anthony Bolton at Fidelity, long regarded as Britain's top
investment guru, has seen his China Special Situations investment trust lose
36% of its value in the past 12 weeks alone. As panic grips markets across the
globe, Guardian Money went in search of the winners and losers.
2009, Bolton, regularly cited as the most successful investor of his
generation, hailed China as "the investment opportunity of the next
decade". His new venture, Fidelity China Special Situations, hauled in
pounds 465m from small investors hopeful that he would repeat the success of
his UK Special Situations trust, which over the previous 28 years had turned a
pounds 1,000 investment into pounds 148,000. At first, Bolton's magic seemed to
be working. The China-focused trust, launched at a share price of 100p in April
2010, rose to a peak of 128.7p on 9 November 2010. But since then it has fallen
in value by nearly half, trading this week at just above 70p. In other words,
someone who put pounds 10,000 into the fund at launch now has just pounds 7,000
left. One of his biggest holdings is the giant Ping An Insurance, which since
last November has fallen in price from around 65 renminbi (RMB) a share to
"The last week or two has seen price volatility, particularly, as high as
I've ever experienced. Some days I've had a number of holdings down 10-15%, to
be followed by days when the reverse happens. Markets are currently focused on
a very gloomy interpretation of the outlook for Europe and the world economies.
However . . . I still believe the general outlook for consumption and services
in China is good and, in an uncertain world, all growth investors should have
some exposure to this area."
Hold on for a
recovery, says Mark Dampier, investment adviser at Hargreaves Lansdown. "I
get fed up with people saying Bolton's gone from hero to the pits," he
says. "Yes, he's been having a tough time, but this is China and it was
always going to yo-yo. I remember how in the early 1990s his UK fund was
terrible after a few quarters of bad returns. Nobody worried about that a few
Six months ago,
Woodford's judgment was under attack. His pounds 18.4bn Income and (near-identical)
High Income funds are Britain's biggest, but they were lagging in the
performance tables as he shunned fashionable mining stocks in favour of
"unbelievably low"-priced pharmaceutical companies such as
strategy paid off. In the past three months, his funds have slipped by only
1-2%, compared with the typical 12% fall at rival income funds. Glaxo is now
trading at around pounds 13.50 a share, against pounds 11.50 earlier this year.
McDermott of Chelsea Financial Services says: "Neil Woodford has been
saying for a long time that there would be a banking crisis. He also correctly
spotted that the market recovery (particularly of 2009) in which he
underperformed was a false recovery and only really funded by QE [quantitative
easing]. He continues to believe that the banks are not yet out of the woods.
This is a reminder that good managers will have years when they underperform
but generally do well over the longer term."
However, all is
not well in the Invesco Perpetual stable. Its pounds 5.3bn Corporate Bond fund
has taken a battering in recent months, with investments in banks such as
Santander, Barclays and Lloyds making it one of the worst-performers in the
past year it has lost 6.5%, or 10% behind the M&G Corporate Bond fund, up
3% over the same period," says Brian Dennehy of advisers Dennehy Weller.
A year ago, the
maverick multimillionaire launched a new fund, Fundsmith Equity, promising
low-cost investing for all - and put in pounds 25m of his own money. The
boxing-mad son of an east London bus driver promised to give the "fat and
complacent" fund management industry a bloody nose - and round one has
gone in his favour. Over the past six months, when the average globally
invested fund has lost 16.6%, Fundsmith is down just 1.8%. The fund is now
worth pounds 170m, with nearly half the money in consumer stocks such as
Colgate-Palmolive, Dr Pepper and Procter & Gamble, whose growing sales in
emerging markets and resilience in domestic markets has protected them from
stock market falls.
formula is to invest in a very small number of very high-quality companies, and
to do so at fair or cheap prices relative to their intrinsic value," says
Smith. "Then we try to do nothing - to allow the wonderful cash returns
those companies generate to shine through in growing value and share prices.
The average company in our portfolio was founded in 1887. They have survived
two world wars and the Great Depression, so they are likely to survive the
was a high street chemist who, between dispensing cold-sore creams and
haemorrhoid ointment, beat the investment experts at their own game. He entered
a Sunday Times fantasy fund manager competition in 1995 and turned a notional
pounds 10m into pounds 502m. Backed by big financiers, he ditched the pharmacy
for the trading floor, opening up a fund for others to share in his success. More
than pounds 50m flowed in from small investors.
since then has been stomach-churning. Over the past three years the fund is
ranked rock-bottom out of the 303 funds in the UK All Companies sector. It is
now worth only pounds 33m as investors have fled.
But in a
remarkable turnaround, Manek's fund has now shot to the top of the tables,
gaining 9% over the past four weeks, when the typical fund in his sector has
lost more than a tenth of its value. Maybe he has found a new wonder drug . . .
Times investment fantasy league winner has proved a loser for small investors
who backed his fund. It's lying 303rd out of 303 funds in his sector - but it
has enjoyed a remarkable upturn during the recent turmoil.
Having a bad
crisis. His new pounds 450m China fund, sold as the "investment
opportunity of the next decade" has lost one-third of its value since
launch and is down nearly half from its peak a year ago
biggest fund manager is having a good crisis. His flagship Income funds are
down just 1-2% over the past three months, compared to the 12% fall in the
average UK equity income fund
City multi-millionaire launched a retail fund a year ago, and it has largely
defied the downturn in markets. Holdings in global consumer stocks such as
Colgate Palmolive have helped him ride the storm.