Square Mile picks out funds with marathon runner qualities

By Tom Poulter, investment research analyst, Square Mile

Added 20th April 2016

With the London Marathon only days away, people across the country will be adding an extra bowl of pasta to their dinners in order to get the energy needed for the big race.

Square Mile picks out funds with marathon runner qualities

The many attributes that these runners require in order to take on the mammoth task of running 26 miles and 385 yards are also required by fund managers across the city in order to deliver the required outcomes for their investors.

The point that all marathon runners fear is the dreaded “wall”, where sudden fatigue and loss of energy hits the body making any movement let alone running difficult. Many runners aren’t able to deal with this pain and give up, while others fight through the pain and make it to the finish line. Similarly no fund manager is immune from difficult periods, however unlike other mangers, which have fallen by the way side, the fund managers mentioned in this article have survived their “wall” and bounced back stronger.


 Oyster Continental European Selection

Every runner who stands on the start line this Sunday should have put in the hard training, pounding the roads of their local streets, so that they are prepared for whatever hits them on race day. Michael Clements, fund manager of the Oyster Continental European Selection Fund, and his team conducts exhaustive preparation when analysing potential investments.  The research work is a collaborative approach that is undertaken by the whole team. They focus in particular on the downside risk of a company's business model, its financial strength and what it is currently worth. Anecdotally Mr Clements has said that some ideas can take six to seven weeks from proposal to acceptance, as research notes are challenged and then re-challenged. Even when an idea is accepted, the security may not enter the portfolio, as Mr Clements is happy to wait until the stock is appropriately priced. This extensive preparation has proved beneficial, as, since Mr Clements took over the fund on 1st September 2014 to 31st March 2016, the fund has returned 15.3% compared to the MSCI Europe ex UK index that has returned 3.8%.


Majedie UK Equity

Consistency is an attribute that every marathon runner needs. If they try to sprint the first miles then they may never make the final mile. But a runner who paces himself over the entire course will be able to reach the finish line. Fund selectors also look for consistency, not just in a fund’s process, but also their performance. Since the Majedie UK Equity fund was launched in March 2003, a number of UK funds have had stellar quarters or twelve-month periods and have then spent subsequent years at the bottom of the pile. However the team of Richard Staveley, Chris Field, Matthew Smith and James de Uphaugh, who run the Majedie UK Equity fund, adopt a similar process to a marathon runner.  They aim to deliver, through a flexible investment approach, a sustainable level of outperformance, and one that is not at the mercy of any particular investment style. This is based on the simple ethos that markets are inherently inefficient and therefore long-term active management can provide investors with superior returns. The team’s philosophy has been proven to work as the fund has outperformed the FTSE All Share, in 95.9% of all rolling three-year periods from launch in March 2003 to 31st March 2016.


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