By Pascal Dowling Funds with a bias towards growth topped the Active Managed sector's returns over...
By Pascal Dowling
Funds with a bias towards growth topped the Active Managed sector's returns over the the three years to June 2000.
The average total return over the three years was 50.95% on an offer to bid basis, with the top performer in the sector returning 88.63% while the bottom fund returned 21.63%, according to statistics from Standard & Poor's Micropal.
Leading the field by a margin of more than 10% was Exeter's fund of funds, Managed Growth, ranked first of 66 in the sector by Reuters Lipper, over a five year period.
The portfolio, managed by Charles Rawson, has matched its high returns with quite considerable volatility, showing a monthly standard deviation of around 5.5%.
Rawson said: "While we primarily seek out undervalued stock, a major part of our holdings have a growth bias, we are particularly interested in the small caps sector.
"The success of the fund is partly due to this bias and partly to the fact that our investment is focused on holdings in investment trusts.
"The investment trust sector has performed extremely well over the past year which has naturally added buoyancy to our performance." The fund saw a sharp decline in returns between June 1998 and June 1999 when it produced -0.27% but bounced back up 55.47% in the following year to June 2000.
Rawson , who joined the team in July 1998, said: "During the summer of 1998, the established house view of the market was quite bearish. The Asian crisis and Russia's impending default put a lot of investors on a defensive stance.
"We did not expect the recovery which began in October 1999, so we sold emerging markets and built up a cash cushion to protect ourselves, on this we were to an extent wrong footed.
"Our volatility was further raised by some unusually high returns made during the tech boom at the end of 1999.
"We shifted our weighting heavily into the technology sector during the summer of 1999 which left us well placed to draw the rewards as returns in the sector went through the roof."
The fund, described by Rawson as a medium risk portfolio investing primarily in smaller caps, was set up in July 1987. The £25m fund has its geographical exposure divided between a 57.1% weighting to the UK, 9.5% to North America, 18.3% exposure to Europe, 7.5% to Japan, 5.7% to the Far East and 1.9% to other investments.
The Royal & SunAlliance Managed Portfolio also did well over this time period, ranking 10 in the Actively Managed sector over three years, according to Micropal figures.
The unit trust is invested in other funds within the Royal & SunAlliance range and is managed by the group's asset allocation director Martin Clements.
He said: "Growth is an underlying theme in our portfolio, we have a full weighting in technology which provided us with a boost during the last quarter of 1999.
"In the long term however, our success is based on our ability to add value to top quality underlying funds."
The fund showed total returns of 57.46% between 1997 and 2000, with volatility substantially lower than most of its competitors.
During the 1998-99 dip in performance, which encompassed the sector as a whole, Royal & SunAlliance Managed was one of only two funds in the top 10 which maintained returns in excess of 10%.
Clements said: "Our fund was somewhat more resilient than its competitors at the time which might partly be attributed to the lower weighting we have in the emerging markets sector.
"The fund is designed to be a low risk vehicle and we strive to maintain this kind of consistency.
"Our fund is most overweight in the US and Europe which until recently served us very well."
During 1999-2000 the fund's discrete returns fell below the sector average by just over 1% and it fell back in the rankings to last out of the top 10.
Clements said: "Poor corporate results in recent times have damaged market sentiment in the US and this has carried through to other countries, especially Japan.
"At the moment, the mood is one of uncertainty and the market is in a state of flux.
"Technology continues to waver and a poor performance has been given recently by a number of big companies in the US and Europe. However, the outlook is not altogether gloomy. We are looking forward to a soft landing next year when we hope we will see lower interest rates from the US."
Royal & SunAlliance Portfolio has an asset allocation split of UK exposure at 50%, US with 13%, Europe at 15%, Japan with 5%, the Pacific with 4%, emerging markets at 1% and cash at 11%.
Clements said: "Our cash levels might look unusually high as we prefer not to invest in bonds at all, we keep that capital in cash form.
"In addition, we are slightly underweight in the UK compared with our peers, this stems from the emphasis we place on overseas investment."
The Invesco GT Managed fund also displays high levels of cash reserves. Fund manager Peter Glynne-Percy believes the rapid growth of European money and credit and an export-led Japanese recovery have put global conditions on an uneasy footing.
The fund has a beta of 1.12 for the past three years compared to the average 1 posted by funds in the active managed sector. The success of the fund, according to Glynne-Percy, is partly attributable to the technology boom earlier in the year. He said: "The majority of the funds we have holdings in have a natural bias towards growth stock.
"This meant that while there was no deliberate overweighting in technology, the fact that most technology stock falls under the growth umbrella meant many of our holdings did extremely w
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