All managers try to be bullish on their portfolios so it is always worth investors asking whether ma...
All managers try to be bullish on their portfolios so it is always worth investors asking whether managers are backing the claims with their own money, not just that of unitholders.
Those that do tend to be popular with intermediaries. Central to Artemis' message to investors is that its managers only invest in the market via the group's funds. Now BestInvest has produced a guide listing managers who invest in their own portfolios. The four highlighted by Best are all well-known: Jeremy Lang of Liontrust, Derek Stuart and John Dodd at Artemis and Stuart Sharp, manager of BWD UK Smaller Companies.
As Best admits, self-investment is admirable but it is not a guarantee of good performance. However the practice does create an alignment of interests between manager and unitholders, which in many ways mirrors that between company directors who own shares in the business and shareholders.
Directors' buying patterns are followed with great interest by fund managers and high levels of purchase, as are now taking place in the UK market, are used as evidence that equities are cheap and shares are due a rebound. If the experts know the market is undervaluing the shares then now is the time to buy, so the argument goes.
It applies equally to funds and fund managers. At conferences and roadshows across the UK managers are no longer the unashamed bulls of the past. The flipside of this greater realism is that managers are less likely to give a view on the future direction of markets. They are falling back on stockpicking as their answer to how they think they can make money in markets that are not necessarily on their way up.
If markets are drifting sideways then the issue is not just whether or not to own an equity, but when to do so. Stuart Fowler, head of UK equities at Axa, told last month's Investment Week Markets Forum in Edinburgh that in some cases the difference between making a good or bad investment was a matter of whether or not he bought at 8am or 4pm. It is not just a question of whether or not a fund manager has a holding in his portfolio, more importantly when does he buy? If the manager is a regular saver it might say something about the volatility of the product, after all even fund managers can pound cost average with the rest of us.
It is a powerful reason to buy a fund if the managers have just bought into the story with their own money. It suggests they believe it is a genuine story and a likely wealth creator. Too many launches in recent years have proved to be long-term wealth destroyers for clients.
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