Piper and Oliver cherry pick strategies in multi-manager range
Collins Stewart has run offshore multi-manager strategies in discretionary portfolios for high-net-worth individuals since 1996.
With the arrival of Ucits III making it possible to bring these strategies to the intermediary market, the firm launched a range of Dublin-domiciled multi-manager funds in September 2008.
Mark Piper and Justin Oliver have jointly managed the Collins Stewart’s Select Affinity, Diversity and Opportunity funds since launch. Eighteen months on, Collins Stewart has over £150m in assets under management in the three funds.
Mark Piper has run multi-manager funds for 13 years. Explaining why Collins Stewart chose to go down the multi-manager route, Piper says: “It goes back to the pre-Collins Stewart days and the investment team I joined at Old Mutual, which was very much multi-manager and multi-asset based.
“One of the team moved over to Collins Stewart and took the multi-manager, multi-asset concept with them. When I came across in 2000 it was a continuation of this theme.”
According to Piper, the multi-manager approach offers extra benefits because no one manager can be a star in all markets and asset classes.
“Multi-asset investing is becoming increasingly popular with investors as a way of diversifying portfolios and managing risk,” he says.
“By going down the multi-manager route you can cherry pick the best of their individual markets strategies and styles and create a best-of-breed portfolio.”
Piper adds: “On top of this we can align our own asset allocation policy to meet our client needs, control risk and benefit from gains as we see them.”
Although the three Select funds are not currently included in UK IMA sectors, performance is compared with the UK peer group which the managers believe most closely matches the investment parameters of the respective fund.
The profile of offshore funds is increasing, with the IMA set to include them in its sectors by the end of June, and Piper is confident all three funds will shortly sit within the respective UK IMA peer groups.
The UK sectors for Affinity, Diversity and Opportunity are identified by the firm as IMA Balanced Managed, Cautious Managed and Active Managed respectively.
The £18.8m Collins Stewart Select Opportunity vehicle is the smallest of the three funds.
However, it leads the way in terms of performance, up 39.5% over one year to 31 March, compared to the IMA Active Managed sector average return of 41.1%.
Designed for those investors seeking high growth from a concentrated portfolio of investment ideas and themes, the fund holds multiple asset classes but focuses on achieving growth with less regard to volatility than the other Select vehicles.
Explaining the underperformance of the fund compared to the Active Managed sector, Piper says: “We took cash up to 40% in the Opportunity fund between September and October 2008.
“We slowly started to reinvest this but we were not fully invested at the start of the March rally period. So we had an initial lag as markets rebounded and our peers who had suffered quite significantly the previous year caught the initial part of the bounce.”
He adds: “We continued to build up the weightings within the portfolio as Q2 progressed. There was a slight lag but we caught most of it up by the end of 2009. We made a very large asset allocation decision to overweight Latin America and to increase Asia.”
The £54.7m Collins Stewart Select Affinity fund has returned 33% over the period, compared to the IMA Balanced Managed sector average rise of 35.7%. The fund is aimed at investors seeking growth over the longer term.
The Diversity fund, which targets both income and growth, is up 26.7%, against a Cautious Managed sector increase of 27.4%.
Piper takes a longer-term investment horizon with both the Affinity and Diversity funds compared to the Opportunity fund.
The Affinity and Diversity funds share a common investment process, with both managers sitting on the fund selection and asset allocation committees.
Piper explains: “What we are trying to do with the Select funds is distill down the best ideas from asset allocation and fund selection. Sometimes fund selection can influence asset allocation and vice versa into a core model.”
These models apply not just to the Affinity and Diversity funds but also to some of Collins Stewart’s private client models.
“They are almost a replication of what we are trying to do in our private client discretionary portfolios,” Piper says.
One of the core elements of portfolio building – particularly in Affinity and Diversity – is the blending of funds.
Piper explains: “We are not just looking for the star manager, the best top-quartile performer on a numbers basis.
“We will always try and blend different styles within each individual market – whether it is a value, a growth, a large-cap, mid-cap or small-cap fund – into a core blend.”
With the Opportunity fund the managers have the flexibility to choose the best ideas from both the fund selection and asset allocation committees.
“Opportunity was driven from a relationship we have with a life company,” Piper says.
“They have a number of investors in Hong Kong and the Far East who wanted something a bit more aggressive. So we put together a fund which was far more active in its asset allocation than our other funds and more short term in its investment views when looking for returns.”
Piper says: “While risk-adjusted returns are very much the core focus of Affinity and Diversity, risk takes a more back seat role within the Opportunity fund.
“If we like Latin America we might put 5% in our Diversity or Affinity funds whereas we might put 20% or 25% in the Opportunity fund.”
The managers can also overlay thematic opportunities as they arise.
Piper explains: “We moved into technology, for example, in the Opportunity fund in June 2009 and benefitted from this significantly in the latter part of last year.
“But it is a theme we think will continue this year so we are broadening it out into our other mandates, and now we have got a technology weighting in Affinity and Diversity as well.
“There is a bit more flexibility in this fund, whereas the others represent a more defined investment process.”
