What makes a good fund manager? Learn quickly and do your homework, says JEFF PRESTRIDGE

Over the years I have interviewed hundreds of fund managers. Some were prickly, belligerent, or monosyllabic; others articulate and charming.

But regardless of their mood and helpfulness (or lack thereof), there is no one overwhelming personal characteristic that defines a good manager – or a bad one for that matter. Curious? Yes. Do you have a good understanding of financial figures? Yes. Smart? Yes.

Some, like Richard Staveley (Rockwood Strategic investment fund), talk a good game and deliver investment returns in spades. His enthusiasm for investing in smaller British companies is boundless – a recent conversation I had with him still resonates in my ears.

Others, like Joe Bauernfreund at Trust AVI Global feel more comfortable letting the performance figures speak for themselves. He has delivered a 69 percent return for investors over the past five years.

Of course, investment experience also helps. Staveley and Bauernfreund have been involved in investment management for more than a quarter of a century.

But this doesn’t count when a manager, as we saw with disgraced fund manager Neil Woodford, suddenly tries to reinvent himself.

In Woodford’s case, he thought his skill at generating returns from buying unloved British shares would translate into identifying unlisted start-up companies that would make it big. That didn’t happen. Investing in unlisted shares is a completely different investment game.

Both Staveley and Bauernfreund (an astute buyer of undervalued companies) have remained loyal and investors have prospered as a result.

When researching a fund, I like to focus on the thoroughness, robustness and integrity of the investment process behind the said manager.

For example, I like what managers Willis Towers Watson are doing with £4.9bn Alliance Witan investment fund, divvying up parts of the fund’s assets for external investment experts from around the world to manage.

The trust is a stable Eddie – an ideal candidate, I would say, for a core interest in a tax-efficient individual savings account (Isa) or a self-invested personal pension (Sipp).

An unbroken 57-year track record of dividend growth is also hugely impressive. I also like the rigor of the investments behind it JPMorgan European growth and incomean investment trust where the portfolio is built up through a mix of quantitative research (financial figures) and qualitative analysis by the investment managers.

The result is a cracking investment fund (see last week’s ‘Fund Focus’ column for Assets).

Although Scottish Oriental Smaller Companies Trust It is more of a peripheral investment than a core investment, but is also supported by a rigorous investment process.

Earlier this year I spoke to co-fund manager Sree Agarwal and was impressed by the painstaking work required to make the trust’s portfolio fit for purpose.

I spoke to him again last week when Agarwal was in Britain to do some marketing and attend the trust’s annual general meeting in Edinburgh.

Based in Singapore, Agarwal is part of an 18-person team at FSSA Investment Managers that contributes to the trust’s portfolio. FSSA is a specialist in Asia and emerging equity markets and part of the global asset manager First Sentier Investors.

The team’s mission is to scour Asia’s major stock markets for companies that have exciting new business ideas, are led by quality management and operate in sectors where there is ample growth potential.

Macro considerations play no role; they are focused on finding companies that will thrive regardless of economic background. Their universe consists of Asian companies with a market capitalization of less than $5 billion (£3.84 billion).

Although it is a huge number, they narrow it down to 300 companies that they keep an eye on all the time. Of these, 50 currently make up the trust’s portfolio.

Before taking a stake in a company, FSSA meets with the company’s directors to determine whether their interests as a potential minority shareholder will be fully aligned with those of management. They also do due diligence on how employees, customers and suppliers are treated.

If all these checks are positive – and the company is top class and not burdened by debt, then investment is made.

The Chinese stock DPC Dash is indicative of the company its managers like. It owns the exclusive franchise for Domino’s Pizza in China and has already opened 1,000 stores.

But it is far behind the curve compared to KFC, which has 12,000 stores.

As DPC Dash opens more outlets, Agarwal says revenues will increase. The stock is now the trust’s second largest holding.

Agarwal says a trust like Scottish Oriental will always be sensitive to disruptions in the stock markets they mine for investment – ​​due to occasional financial disruptions.

Yet it delivers long-term results, as evidenced by the 58 percent return over the past five years.

Like Alliance Witan, AVI Global, JPMorgan European Growth & Income and Rockwood Strategic, Scottish Oriental is worth considering as part of your investment portfolio.

Nottingham rebrands so off-target

Thank you for all your comments on The Nottingham Building Society’s decision to change its brand name, which will ultimately mean the eradication of the Robin Hood logo.

Judging from those who have contacted me, clients are not happy with the makeover.

They accuse the company of wokeism and wasting money (the company won’t tell me how much the rebranding will cost, although it did emphasize that it used an agency with good value for money).

People are also unimpressed by the use of a squiggly ‘N’ in new signage for the Nottingham, which will now be called Nottingham Building Society.

The squiggle, I’m told, represents a point of difference and signifies society’s commitment to providing mortgages to customers who would otherwise struggle to get one. I still have to understand that explanation.

Some customers say that if Robin Hood had had to go, an acorn or oak tree would certainly have been a better alternative – in recognition of the Major Oak that stands in Sherwood Forest. For the record, Nottingham made a pre-tax profit of £0.7m in the first half of this year (2023: £11.7m).

The collapse in profits was mainly due to the making of a £10.7 million provision to compensate customers involved in the Philips Trust Corporation scandal, which involved other societies in addition to Nottingham (Leeds, Newcastle and Saffron). were involved.

For the record, Nottingham Building Society boss Sue Hayes was paid £478,000 last year, including a £62,000 bonus. No wonder Robin Hood became a cropper.

Premium financing? Ban it now

Recent regulatory efforts to make the auto and home insurance markets fit for purpose have failed spectacularly.

So forgive me for being so skeptical about the regulator’s latest investigation – this time focusing on the ‘premium financing’ scam that many customers paying for cover through monthly installments have been forced to cough up.

Nothing other than banning expensive premium financing will do, but I bet the regulator (the Financial Conduct Authority) will figure it out.

As for the task force set up by the government to specifically look at the rising cost of car coverage, it is well intentioned. But it’s like closing the gate after the horse has run away.

Over the past two and three-quarters of years, insurers have gotten away with the equivalent of blue murder by imposing unjustified premium increases on many policyholders, especially the elderly.

Unfortunately, these financial abuses will fall outside the task force’s purview. If you are a victim of premium financing, email: jeff.prestridge@mailonsunday.co.uk.