Three fund managers poised to bounce back in 2014

7th January 2014

The fund managers themselves may have mixed feelings about appearing on the list, but Hargreaves Lansdown’s Adrian Lowcock has picked three fund managers who have not done so well recently but who should bounce back in 2014.

He outlines why below.

Tom Dobell – M&G Recovery

 Why he has underperformed

–          His fund has benefited from merger and acquisition activity (M&A) in the past. A lack of M&A in recent years has affected performance.

–          Investors have focused on better quality companies in the past couple of years, ignoring those companies undergoing change and restructuring, the types of companies Dobell invests in.

Why you should stick with the manager

–          Fund manager styles come in and out of favour. Even in the tough years Dobell continued to stick to the same process that has worked successfully.

–          M&A activity is starting to pick up which could benefit the fund.

–          Dobell has an impressive long term track record and outperformed the stock market for ten consecutive years between 2001 and 2010.

 

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Sebastian Lyon – Troy Trojan

 Why he has underperformed

–          Lyon focuses on capital preservation and held defensive assets which performed poorly in 2013. For example, he had significant exposure to gold which, in 2013, had its worst year for 30 years. In the fund he currently has 10% in gold and 3% in gold mining shares.

–          Lyon’s concerns over inflation have yet to materialise and indeed inflation has been falling in the UK.

Why you should stick with the manager

–          In the past Lyon has been successful at getting the big macro-economic calls right. He believes quantitative easing will result in inflation in the medium to longer term. This fund should provide investors protection against inflation.

–          Sebastian Lyon focuses on capital preservation, but performance in 2013 was poor and for the first time the fund lost money for investors. We don’t expect that to be repeated in 2014, although the fund’s defensive nature means it may lag a strongly rising equity market.

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Bill Mott – PSigma Income

Why he has underperformed

–          Mott’s macro-economic views have generally been correct, but he became too focused on his long term view and missed shorter-term opportunities.

–          Our analysis suggests stock selection by the co-managers has been poor.

–          The market rally has been driven by momentum, a style that does not suit Bill Mott.

Why you should stick with the manager

–          Bill Mott’s biggest strength is his ability to understand the economy. As economic recovery gathers pace, central bank intervention is reducing and his views on the economy should be better reflected in the stock market.

–          Gervais Williams is joining Mott as co-manager, replacing Graham Cummings. Our analysis shows he has excellent stock picking skills which should complement Mott and help translate his macro calls into the right stocks.

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