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Bottom-up maximises returns
By Rob Griffin
Jamie Allsopp certainly doesn't lack confidence. The 29-year-old has only been a fund manager for four years, but is already convinced his Hidden Value portfolio can become one of New Star's flagship offerings. "I have grown the funds under management from £800,000 to £72 million and believe it can become significantly bigger from here," he insists. "I look at my competitors and they're around the £400 million mark."
This belief in his abilities is shared by New Star founder John Duffield, who not only approved his appointment to the helm in October 2003 - but backed him with £1 million of his own savings. "It's an even better incentive than having your own money in the fund but it meant that I didn't sleep for a long time," laughs Allsopp, who specialises in covering UK equities and previously worked as an analyst.
The aim of the Hidden Value fund - launched six years ago - is to achieve the maximum possible return by investing mainly in UK equities, with the capability of taking advantage of special situations. "I'm trying to access global growth through companies listed here," he explains. "I like overlooked companies which might benefit from the market re-rating either them or the sector in which they operate."
A prerequisite, however, is knowing the management teams - and this is particularly important with smaller firms which might lack the long-term financial data, meaning the decision whether or not to invest will be rather more subjective. "I only invest in companies where I've met the management and even then it will only initially be a half a per cent stake," says Allsopp. "I ask which parts of their business are growing, how they are incentivised and their view of the competition."
Balanced performance
At the moment, 50% of the fund is in small cap/AIM stocks, 30% is in the large caps, 10% in the mid-caps and 5% overseas, along with a bit of cash. The top 10 holdings, which include stocks such as Rio Tinto, account for just under 20% of assets.
"Large caps have bigger weightings and then there is a tail of smaller stocks which provides liquidity and means stocks make similar contributions to performance," says Allsopp. "I've got just over 100 holdings but am trying to get down to around 90."
One example of a stock he likes is Accsys Technology - an environmental science and technology company which sits well with the green theme that he has been championing in the portfolio. "This is one of my larger holdings and is a company that I've had for a couple of years," he explains. "It has a technology that can treat softwood and make it hard in a low-cost, non-toxic way, and has done very well."
In the years he's been at New Star, Allsopp has also played a key part in promoting the company with his face beaming down from one of the many billboard posters that were dotted around London. But, as the performance figures prove, Allsopp is much more than a highly-prized tool with which the marketing department can gain valuable column inches in both financial and mainstream publications.
In the four years since he took over, the fund has returned 116.9 % - which makes it the fourth best performer out of more than 200 rivals in the fiercely competitive UK All Companies sector. Over the coming months, however, there will be more constraints on his time as Allsopp has recently launched the New Star Heart of Africa fund which invests in companies based in countries such as Nigeria, Kenya and Botswana.
While he's roaming around looking for interesting opportunities, dealers will keep him updated with what's happening back at home, although his laptop is equipped with access to trading systems should portfolio changes be required. "I have just spent two weeks out there but I went for one week and then came back before going out again because I didn't want to leave Hidden Value for too long," he explains. "That fund is still my primary concern."
Stockmarket shakes fund
The recent bout of stockmarket turbulence has affected the fund, but he remains confident that the companies he has chosen for the portfolio have exciting futures and will help him deliver decent returns. "August was a very difficult month for the fund," he admits. "When liquidity dries up and volatility increases, this is the time when my fund effectively underperforms. Volatility is now coming down again so that should benefit me."
Bearing in mind that he is running two investment funds, as well as being the co-manager of a hedge fund - and not yet 30-years-old - it's perhaps unsurprising that Allsopp feels quite content at New Star. The immediate goal, he says, is continuing to deliver decent returns and to grow Hidden Value's funds under management. "This is my first fund and I really enjoy running it because I'm afforded a very free rein to invest how I see fit," he adds. "I'm very happy here, Hidden Value is my fund and I'm not relinquishing control."
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