If the secret of a good investor is to buy when sentiment is poor and sell when it is good, then the...
If the secret of a good investor is to buy when sentiment is poor and sell when it is good, then the future must be looking pretty good for international generalists.
These flagships for the industry have had a tough few years with their generally poor portfolio performance, broad discounts, buyback policies that have failed to stem the tide and what many see as half-hearted moves to multi-manager by Witan and Foreign & Colonial.
Sentiment continues to dip as these large companies lumber on, gradually reducing themselves in size through share buybacks, with boards seemingly incapable of reform.
So is the concept of an international generalist a good idea done badly or just a bad idea, full stop?
It is certainly not the latter. Lots of boutiques now popular with discretionary managers, such as Lindsell Train or Edinburgh Partners, are keen to ensure they have global flexibility and successful funds of funds businesses, such as Jupiter, are generating returns from shrewd international asset allocation.
So is the concept just being badly executed? The emphasis of the modern boutique internationalists is often on stockpicking and smaller companies, whereas the established players tend to have a large-cap bias. What is often forgotten is that mid and small caps have been the place to be in the last couple of years.
When large caps take up the running, international generalists will suddenly look a far more attractive proposition. Many of them have failed to asset allocate further down the market cap scale, but will the boutiques of today be willing and able to switch into larger companies when the blue chips start to fire on all cylinders?
In defence of those who consistently run a large-cap exposure, rather than playing up and down the market cap scale, it must be remembered blue chips tend to have very secure dividend streams.
If reinvested dividend is the way to make decent long-term total return in equities then perhaps the emphasis on blue chips is not as daft as it seems.
One of the biggest complaints against international generalists is that no one would ever launch one today, implying they are old fashioned and well past their sell by date. But no one ever launched an international generalist in the past. They are the boutiques and private wealth vehicles of yesteryear which, as they grew, began to attract external investors.
These are vehicles that have a history that begins with family money, investments in Latin American railway bonds or the pooled assets of successful merchants in Dundee. They are boutiques that made it.
As such they have a track record of success, not failure. They may be having a tough time but in 10 years the chances are many of the international generalist names of today will still be around.
