Managers who can beat off the bears

based on an article by Justin Harper in 2007

Performers:clockwise from left, Tony Nutt, Neil Woodford, Bill Mott

INVESTORS with jitters about the stock market’s volatility take heart — the record suggests that a small elite of fund managers can help you to survive even violent swings.

Last week* the FTSE100 nosedived more than 400 points from its 12-month peak to below 6000. It has since recovered more than half the losses. Nervous investors may be thinking about pulling out of the market, but the more seasoned ones know it is a long-term game.

We have taken a look at how the best fund managers do in times of trouble. The signs are that a handful really prove their worth. One is Neil Woodford, who runs Invesco Perpetual’s gigantic Income and High Income funds, with total assets of more than £11bn.

The Income fund was launched in 1979 and £1,000 invested then would be worth an impressive £71,766 today. But even if you bought at the start of the bear market of 2000-2003, the fund would still have done well — a sign of a great fund manager. During those four years Woodford’s fund would have turned £1,000 into £1,327 while the average unit trust would have lost £122 and a FTSE 100 tracker would be down £277 to £723, according to Standard & Poor’s. The fund is run quite defensively, with holdings in tobacco and utility firms which display resilience in bad times.

Thankfully Woodford is not the only manager who can be regarded as safe in a storm. Jupiter Income, run by Tony Nutt, has also been a good performer through good and bad times. Since it launched in 1987 it has turned £1,000 into £11,556. During the difficult 2000-2003 period it turned £1,000 into £1,152. Newton Higher Income, run by Tineke Frikkee, would have returned £1,239 while others were losing money. Brian Dennehy, at IFA Dennehy Weller, says, ‘It is comforting to know there are a handful of good fund managers out there that can steer a steady ship in troubled times. Many are in the equity income sector.’

Another safe performer is Bill Mott who started to run the Credit Suisse Income fund in 1986 and left later, only to come back last year before departing for good. A £1,000 lump sum invested at the start of the bear market would be worth £1,327 — £449 more than the average unit trust. Mott moved on to investment house PSigma Asset Management and this week launched the PSigma Income fund. He is one of the founders of PSigma, so has an even stronger interest in its success. He has a reputation for picking themes and ploughing money into them. Mott says, ‘Right now the big theme is emerging markets and I’m looking at UK companies that will profit from their expansion.’ The portfolio will start with 30 to 35 stocks, mainly in larger companies. Some market slumps are so severe that even the best fund managers suffer, but the recent track record suggests that the best can take you through even in tough times.