Twenty years on, I was afraid to ask after the health of Gary Potter and Robert Burdett’s Tamagotchis, though I’ll assume they will have been nurtured in the same way they have looked after their Dynamic Planner-rated Multi-Manager Navigator and Lifestyle ranges.
The pair met at Rothschild Asset Management in the 1990s, worked together at Credit Suisse and now helm what is a nine-strong team running £2.7bn in assets.
A consistent philosophy
While the investment landscape has changed somewhat in the past 20 years – for example, 65 companies in the FTSE 100 in 1996 are no longer independent businesses – Potter stresses that the team’s core philosophy of fund selection has always remained consistent.
“Within a few months we realised we had the same thoughts on what makes a good fund; and a fund manager is just one of those ingredients,” he says.
“The environment in which a fund manager works is another important consideration. Within a couple of years, we set about creating a quantitative scoring system for fund management. We buy people, we don’t necessarily buy the product.
“You need to understand the people: what goes on around the manager, who’s the boss, how they are paid, who they look up to and whether they are good stockpickers or good macro people.”
The pair talk readily about manager selection as an “art” backed up by the “science” of their research analysis of underlying portfolios. From this they create a dynamic qualitative scoring system and put together a “squad” of managers across different asset classes.
With expense in mind, Burdett stresses that multi-manager portfolios must always be more consistent than the average fund. He cites data to suggest that never more than around 18% of funds achieve above-average performance three years in a row.
He adds that the team maintain a belief that a core/satellite approach to investment does not work for multi-manager, or indeed for financial advisers.
He says: “Most core equity funds have a target of index plus 1%, so if they hit that two years running and then miss it by -1% in the third year it doesn’t sound like a bad outcome, but your net return is then is 0.3% per annum.
“If you are an IFA and you charge more than 0.3%, that fund is going to suck your client’s capital away. If you are a multi-manager and your fee is more than 0.3%, the same applies. It is very simple maths, but core funds are not really any use to us.
“We need to have a larger number of smaller positions in individually higher-potential holdings, and that’s what we’ve always done. We have always been more diversified, with above-average consistency.”