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Power sharing pays off By Rob Griffin
Power sharing rarely works. The concept of having more than one person at the helm has failed miserably when tried in football clubs, newspapers and political parties, but Rensburg appears to have found a way to make it viable in fund management. Its UK Managers' Focus Trust, which is run on an equal basis by four individuals, has comfortably out-performed both the FTSE All-Share index and the UK All Companies sector since being launched at the beginning of September 2006. "There isn't one person managing this portfolio - and this sets us apart from a lot of other funds," explains Colin Morton, who controls its large-cap exposure. "As far as we're concerned, there are four portfolios which are combined to form the main fund." Each member of the quartet has a 25% share of the fund's assets to invest in the area of the UK market which they know best, while any new money that comes in is equally divided up between them. As well as Morton managing the large-caps, there is Paul Spencer taking care of the mid-caps and Stuart Sharp deciding the small-cap holdings. Mark Hall, meanwhile, has a multi-cap brief that allows him to select from the entire market. Although no one is in overall charge, it comes down to Morton - in his official role as investment director - to cast his eye over the portfolio to make sure there are no obvious problems, such as being 100% invested in one area. "It's just a supervisory role and consists of looking at the portfolio in terms of how much is in various sectors," he explains. "On a day-to-day basis, though, we're all running our own individual portfolios." The Trust, which aims to produce a total return in excess of the FTSE All-Share Index, has a maximum of 50 holdings. While small-cap manager Sharp can pick 20 names - due to the increased volatility in that area - the others are limited to 10. Currently, the fund is 27% invested in the FTSE 100, 33% in small-caps, 30% in the mid-cap arena and with about 10% in cash. "It's a relatively easy fund to run," says Morton. "All we have to do is each pick the 10 - or 20 - companies that we like the best. Of course, we might get those decisions wrong but the concept itself is actually quite simple." The performance figures achieved so far indicate that relatively few mistakes have been made, even though some of the holdings haven't lived up to expectations. Air conditioning group Worthington Nicholls (WNG) is a prime example. "It did really well and then had a profit warning," explains Morton. "We sold it but this was costly and an example of something that went wrong. You just hope that more of your decisions are right." Picking well...and a touch of luck The fund's investment in Lamprell (LAM), a small firm servicing the needs of the oil industry, has worked out much better. "The company did very well due to what has happened with the oil price and the increasing demand for its services," he adds. "We have since sold the position and made a very good profit." Morton attributes the success so far achieved to a combination of picking the right companies - and enjoying a dose of good fortune. "We are overweight towards mid and small cap stocks and this part of the market has performed very well," he admits. Each of the managers has a slightly different investment style. "I tend to be quite value-orientated and look for things like cash flow and balance sheets," explains Morton. "Mark and Paul are a bit more growth-orientated, while Stuart is trying to find the next big story. This combination works quite well." While naturally delighted with the fund's first year, the four managers are conscious of the fact that the pressure is on to create a long-term track record. "We've had a good year but we're well aware that you're always going to have a bad three or six month period with a fund like this," says Morton. "It's about how you get through it." Even so, he still believes that it's possible to make money in virtually all conditions, as long as you have the right investment process. "There will be a lot of companies whose share prices will still continue to rise even if the stockmarket itself is flat or even going down," he says. "You just have to pick the right ones." The ideal scenario, therefore, is to deliver double digit returns every year. "We want to make money for people," adds Morton. "They can get 5-6% by taking no risk so you'd hope to achieve 9-10% for them in a fund." However, it's important to acknowledge the fund won't suit everyone. "It's obviously riskier but has the potential to deliver higher returns," he says. "Most people who buy this fund will be looking for it to provide that extra bit of spice in their portfolios."
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