The winners of What Investment's Fund Management Awards 2009, recognising excellence in open-ended and closed-ended fund management.

About the awards
Unit Trust/OEIC Management Group of the Year
Specialist Management Group of the Year
Unit Trust/OEIC Fund Manager of the Year
Most Consistent Unit Trust/OEIC
Investment Trust Management Group of the Year
Generalist Investment Trust of the Year
Specialist Investment Trust of the Year
Most Consistent Investment Company

About the Awards
The past couple of years have been tough ones for many fund managers, as the fallout from the global credit crunch has sent the returns from most markets and asset classes plunging dramatically. But it is in times such as these that fund management skill comes to the fore, with the ability to protect investors’ wealth, as far as possible, from the economic storms blowing around the global markets being a key element in those portfolios that outperform.

So it is as important as ever to recognise those fund management groups and individual fund managers who have consistently outshone their peers in these troubled times, and that is what we seek to do in the 2009 What Investment Fund Management Awards.

Now in their 25th year, our awards seek to identify and reward those investment funds and management groups that consistently deliver outperformance and add value for their investors.

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Unit Trust/OEIC Management Group of the Year
Jupiter Unit Trust Managers
In a very close contest for the best open-ended fund management group, Jupiter just came out on top, ahead of Newton Investment Management.

Up from fourth place in last year’s awards, Jupiter was the only one of the shortlisted managers in this category to top more than one of our judges’ lists and scored consistently highly with each of our panel.

Established in 1985, Jupiter originated as a specialist boutique concentrating on managing equity portfolios across a range of global markets. Chief executive Edward Bonham Carter explains, ‘We believe that long-term outperformance is best achieved through fundamental, bottom-up stockpicking, and recognise that this approach can result in portfolios that deviate significantly from their benchmarks.’

He adds, ‘Jupiter’s investment approach revolves around one concept – seeking to optimise performance over the medium to long term without exposing our investors to unnecessary risk. Jupiter’s success as a fund management group has its roots in the investment culture we have cultivated from the beginning. We believe that talented fund managers perform best if they are given the freedom to invest as they see fit, subject to the constraints set by the fund’s objectives.’

Our judging panel certainly felt that this approach had delivered over the past five years, with strong performance across areas as diverse as UK small-caps, equity income, European equities and global financials. Dan Kemp observes that ‘In a business where spin is often a substitute for real substance, Jupiter stands out as a group that has focused on nurturing fund management talent and delivered consistently good returns for investors by giving managers the freedom to follow their own individual strategy and avoiding the twin problems of “groupthink” and benchmark obsession.’

Runner-up was Newton Investment Management, a group that has seen a steady improvement in the performance of its funds over recent years. Andrew Merricks was particularly impressed
by the fact that they ‘offer a wide range of consistently top-performing funds across most sectors, and in these markets it is important not be seen as a specialist in a particular sector. So, for example, they have a very strong UK equity income offering, but also have a global income fund and an Asian income fund that is part of a wider Asian equity fund range.’

He adds, ‘They are giving people a lot of choice, for example with the new global bond fund, which they have outsourced to a specialist manager. This is something they can do, being part of the global BNY Mellon group, but the original Newton funds have looked after their investors very well over the years, through a couple of good strategic mergers. I have never felt I have been let down by any of their funds.’

James Davies observes that ‘It has been a good year for them. Fixed interest investment has been a useful strength to have during the recent upheavals, and their international Bond Fund has done very well. Also, in their equity income fund they got the calls right on things like commodities. The global resources available to a group that is part of BNY Mellon will be a very important strength if market conditions continue to be difficult.’

In third place was First State Investments, supported by particularly strong performance from its overseas specialist funds (of which more later), just ahead of Cazenove Investment and Threadneedle Investment Services.

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Specialist Management Group of the Year
First State Investments
First place in our Specialist fund management category goes, appropriately enough, to First State Investments, the UK asset management subsidiary of Commonwealth Bank of Australia. First State focuses on managing specialist funds, with particular emphasis on the markets of the Asia-Pacific region, global emerging markets, global resources and global equities, property securities and infrastructure.

Fund managers at First State Investments are organised into teams covering each of these specialist areas, and much of the success of its specialist mandates within its UK operation is down to the Asia Pacific & Global Emerging Markets Equity team, led by Angus Tulloch (pictured). Tulloch says that his primary focus is stock selection and portfolio construction, taking a long-term view of companies with the potential to grow their earnings over time.

Looking at the reasons why First State Investments came top of this category, Tim Cockerill draws attention to First State’s ‘conservative management style for funds investing in emerging markets, and in the Far East in particular. The group has adopted a consistent management approach based on very thorough analysis.’

Indeed, First State has risen dramatically over the past year, having not featured on the shortlist 12 months ago. Tim Cockerill attributes this to the group’s patient investment style, adding that ‘The core of what they do is very simple. First State looks for companies whose earnings are visible. This means that their funds tend to be dull but dependable. In a bull market they will underperform, but the returns will still be reasonable. However, when times get tougher, this approach will really come into its own.’

James Davies says, ‘My perception is that First State’s focus on global markets, especially emerging markets, is a strength at the moment. Being based in Australia and Singapore is certainly a good idea if you are going to focus on Asia.’

He adds, ‘ The things they are good at are Asia and global resources, and they also have a presence in infrastructure investments. These are areas where we would want to be putting our clients for the foreseeable future.’

Dan Kemp points out that ‘First State has patiently developed one of the leading franchises in Asian and global emerging market investment through the consistent application of a disciplined investment strategy that has performed well in both bull and bear markets.’

First State’s achievement is all the more noteworthy because it has pushed Neptune, which has dominated this award in recent years, into second place.

James Davies feels that ‘Neptune has a very clear investment approach that goes across its full range of funds. As a house, it takes a top-down sector view and it has called broadly the right themes over the past few years. And looking forward, I would argue that this type of sector-based approach is a sensible one to adopt in the global economy that we are all now experiencing.’

Dan Kemp adds that ‘Rather than recruit high-profile fund managers, Robin Geffen
has built an excellent equity-focused fund management business at Neptune, by enabling young investors to develop while maintaining a disciplined investment framework.’

The remaining places in the top five were filled by management houses that had shown up well in our overall open-ended fund category – Cazenove Investment, Jupiter Unit Trust Managers and Newton Investment Management – reflecting the significance of a strong specialist management team to overall group performance.

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Unit Trust/OEIC Fund Manager of the Year
M&G International Sovereign Bond
2008 was a very tough year for fund managers, with relatively few showing positive returns over the period. Most of those that did were running bond funds, investing in fixed-interest securities, so it is perhaps not surprising that our individual fund manager of the year is Jim Leaviss, head of the bond team at M&G UK, for the impressive performance of its M&G International Sovereign Bond fund.

However, this really was a team effort. Although M&G has been managing unit trusts since the early 1930s, for the past ten years it has also been the investment subsidiary of Prudential, with the result that the group currently has £134 billion of funds under management, a significant part of it invested in bonds.

This means that a considerable amount of fund management resource is available to Leaviss and his team in running their portfolios, including M&G International Sovereign Bond. Launched in 1999, this is an unusual fund as it focuses on ‘investment-grade sovereign debt securities denominated in the currencies of the major industrialised nations’ but excludes holdings of UK Gilts. This gives investors access to a portfolio of international government debt that acts as a useful diversifier within a wider investment portfolio.

And this has certainly been a profitable area over the past couple of years. Tim Cockerill asserts that ‘M&G has really got it right in the fixed interest space of late, and it is very much a team thing. The group has a very strong team of fixed interest managers who work together well. They are also independently minded and have stuck to their guns through some unfavourable markets, and it has worked well for them.’

Andrew Merricks adds that ‘All the candidates for this award deserve the accolade for
achieving the returns they have in a difficult market. M&G has always got to be respected on the fixed interest side. Admittedly, it was this sector’s ‘turn’ last year, but the M&G team has ridden that wave very well.’

Indeed, a theme that has developed throughout this year’s fund management awards is that funds and managers that underperformed relative to their peers during the boom times have come into their own as things have got more difficult. This is certainly the case with the runner-up in this category, CF Ruffer Total Return, a fund that has regularly lead the Cautious Managed sector by providing consistently positive returns.

Dan Kemp points out that ‘CF Ruffer Total Return was out of favour in the bull market, appearing dowdy while others accepted increasing levels of risk. However, Ruffer’s bearish investment approach has served investors well in the turmoil following the credit crunch.’

The best-performing fund over the course of the year was the third-placed Neptune Japan Opportunities, where manager Chris Taylor’s strategy of shorting the Japanese market index has caused a degree of controversy. Nevertheless, as Andrew Merricks points out, you cannot deny that it was highly effective.

He comments that ‘As a fund manager, Chris Taylor has done extremely well, and if you were an investor in the Neptune Japan Opportunities Fund over the past year and a half, you would be very pleased at the returns he was getting from a dismal market.’

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Most Consistent Unit Trust/OEIC
Invesco Perpetual High Income
For the second year running, an Invesco Perpetual fund tops the category of most consistent open-ended fund, but whereas last year the accolade went to the group’s Latin American fund, this year it is in the much more competitive area of UK equity income. What is even more remarkable is that the runner-up spot in the same category is occupied by another of Invesco Perpetual’s income funds, run by the same manager.

But then, this manager is Neil Woodford, who has built up an unsurpassed reputation over the past 20 years for generating consistent and sustained returns from income-orientated UK equity portfolios. His original Invesco Perpetual Income Fund, launched in 1979, is now over £5.6 billion in size, while this year’s award winner, Invesco Perpetual High Income, which appeared in 1998, is close to £8 billion.

Woodford, insists, however, that he has no difficulty in managing over £13.5 billion effectively and, indeed, the long-term performance of his funds has been extremely consistent. Inevitably, the concentration of the portfolios is on familiar blue-chip names, since these are the companies with both the greatest liquidity and the strongest prospects of maintaining dividends in these troubled times.

Names like AstraZeneca, BG, GlaxoSmithKline, Reynolds American, British American Tobacco, Vodafone, Tesco, National Grid, Imperial Tobacco and BP – the fund’s top ten holdings, which account for over half of its portfolio – may not be original, but will give a degree of reassurance in volatile markets.

Woodford reports that ‘The fund is defensively positioned as we expect economic conditions within the UK to remain difficult for an extended period. We believe that the recent strong outperformance of cyclical sectors has been based on misplaced expectations for economic recovery. While we expect the pace of deterioration in the UK to slow, we also believe that the combination of recession and banking sector crisis will prevent a rapid recovery.’

He adds, ‘In this environment, we believe that the strongest returns will come from companies that are financially sound, with the ability to deliver consistent earnings and sustainable dividend growth. We continue to favour the tobacco, utility, pharmaceutical and telecommunications sectors, which we believe offer clarity in terms of future earnings and dividends. We also believe that, having been marked down amid the general market weakness, these companies are undervalued.’

Tim Cockerill notes that ‘Neil Woodford has been bearish about the outlook for the
UK stock market for a lot longer than most. Indeed, you could argue that he was probably too early in taking such a bearish stance. But his independence of mind is second to none and fits well within the approach adopted by Invesco Perpetual. These are genuinely absolute return managers who don’t follow benchmarks but believe in always doing what is right for the particular fund.’

Dan Kemp agrees that ‘Neil Woodford continues to confound critics who believe that he runs too much money. While capacity may yet prove to be a problem, it shows no sign of holding back performance yet.’

And James Davies observes that ‘The figures speak for themselves. Neil Woodford has been in defensives for a long time, and it has stood him in good stead. The day that people stop smoking and buying detergent to wash their clothes will be the day to get out of Neil Woodford’s funds.’

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Investment Trust Management Group of the Year
JPMorgan Investment Trusts
The investment trust arm of major global investment house JPMorgan has retained its title as Investment Trust Management Group of the Year, after a very close contest with Gartmore Investment. Having been runner-up in 2007 and fourth in 2006, this demonstrates that JPMorgan has maintained a consistent level of performance across a wide range of funds for a number of years.

JPMorgan Asset Management can trace its history back more than 150 years, but for much of that time it was known as Fleming Asset Management. Although it has steadily added new, often specialist overseas, mandates to its range over recent years, the group also handles the portfolios of several longstanding traditional investment trusts, three of which, JPMorgan American, Mercantile and JPMorgan, have been in existence for over 120 years.

In its current form, as JPMorgan Asset Management, it has over US$1.2 billion under management, £4.8 billion of it in closed-ended investment companies. And is regarded as the largest manager of investment trust portfolios, with expertise spanning all key asset classes and investment markets.

This means that JPMorgan’s fund managers can tap into considerable global research resources. As head of investments David Barron points out, ‘We believe that nothing beats local knowledge. So we have investment teams networked across more than 15 cities across the world, connected by investment hubs in London, New York, Tokyo and Hong Kong.’

He adds, ‘With 25 investment trusts currently under management, the group has a very experienced team, with many of the members having been long-standing employees. JPMorgan don’t believe in the “star manager” culture, but instead focus on providing investors with a reliable and trustworthy team. Our range of trusts have performed consistently well, an achievement that is all the more noteworthy as it comes across a range of generalist and highly specialist single market and regional funds.’

These factors were also appreciated by our judges. Tim Cockerill observes that ‘The fact that JPMorgan has done so well in this award category for several successive years must be telling you something about their ability when it comes to managing investment company portfolios. What is impressive about what they do is that JPMorgan Investment Trusts has a very wide range of mandates that, in the main, they have been running for many years.’

He adds, ‘As a group, they have been around a long time and accumulated a lot of experience, which is also very important. They offer a mix of specialist funds and more mainstream portfolios, It really is a complete offering in the investment trust space, which is why they deserve to be top.’

Charles Cade of Numis Securities also points to JPMorgan’s ‘generally very consistent performance’ across its range of trusts, highlighting JPMorgan Mercantile. JPMorgan Euro Fledgling and its smaller companies funds in particular.

For Nigel Sidebottom of Premier Asset Management, the key factor was that JPMorgan’s investment trust team had produced ‘solid performance across the whole range, with some excellent individual five-year performances against sector peer groups’.

Mention should be made of the performance of Gartmore Investments, up from tenth last year to runner-up spot this time, during a period when conditions were particularly testing in many of the areas in which their funds specialise.

Charles Cade was very positive on Gartmore’s performance record, pointing out that its ‘Global, Irish, Growth Opportunities and European trusts have all shown consistent long-term performance relative to their benchmarks.’

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Generalist Investment Trust of the Year
Murray International Trust
This year’s Generalist Investment Trust of the Year is Murray International, one of the stable of investment trust portfolios managed by Aberdeen Asset Managers. Although subject to a reorganisation in 1991, the fund has a venerable history dating back to 1907, when it was floated, as the Scottish Western Investment Company, its first chairman being the future prime minister Andrew Bonar Law.

Murray International’s portfolio has been under the stewardship of Bruce Stout since the middle of 2004. Stout himself joined Aberdeen in 1987 following its acquisition of Murray Johnstone, the original managers of the trust, and spent his early years as a fund manager specialising in emerging markets.

At just over £715 million in size, it is one of the smaller generalists, but still of sufficient size to provide investors with a global investment spread. Indeed, this is one of its hallmarks. The bulk of the portfolio is invested overseas, with just under 22 per cent currently in the UK. Pacific ex-Japan accounts for just under 28 per cent, followed by Europe (ex UK) 25.5 per cent, North America 19 per cent and Latin America & Emerging Markets 16 per cent.

The trust’s objective is to achieve an above-average total return from a global portfolio, but with a particular emphasis on growing its dividend year-on-year.

Emphasis is very much on picking individual stocks. Indeed, the manager attributed roughly two-thirds of last year’s outperformance to stock selection. Within the equity asset allocation, positive contributions came from the underweighting of the UK and overweighting Asia and Japan, but the majority of outperformance was due to the success of stock selection strategies in Europe, North America, Asia and Latin America.

Of current market conditions, Stout observes that ‘Volatility in financial markets looks set to continue as negative recessionary fears and positive recovery hopes ebb and flow over the foreseeable future. With market direction impossible to predict, investment focus will remain on individual companies where market weakness continues to uncover excellent opportunities to acquire high-quality, low-priced equities based on a longer-term view.’

Charles Cade notes that ‘Bruce Stout has generated excellent performance at Murray International over the long term.’ Tim Cockerill points out that ‘Aberdeen is a very good outfit these days, with some extremely able and experienced fund managers. Bruce Stout certainly comes into that category, and he has been in charge of the Murray International portfolio for some years.’

He adds, ‘It is a nicely diversified fund that is not particularly UK-centric. So you have a well-balanced fund that is giving you exposure to a broad range of markets, but where the manager will also take some relatively big positions in stocks he particularly likes.’

Runner-up was RIT Capital Partners, a trust managed by J Rothschild Capital Management with a global portfolio and higher weighting to unquoteds and private equity funds than is the case with most other generalist funds.

For Nigel Sidebottom, this trust had achieved ‘outstanding and remarkably steady performance’, and it was generally praised by our judges for its long-term consistency.

Third-placed Lindsell Train Investment Trust also scored consistently with several of our judges. Charles Cade points out that it is ‘differentiated by its absolute return focus’.

An independently managed trust, run by the company set up in 2000 by former CIO at GT Investments Nick Train, the trust follows a flexible global investment mandate and has been amongst the most active in using share buy-back powers to limit the size of its discount.

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Specialist Investment Trust of the Year
JP Morgan Emerging Markets
It was a contest between emerging markets and European equity portfolios for the Specialist Investment Trust category, with one of the former, JPMorgan Emerging Markets, coming out on top.

Launched in 1991, JPMorgan Emerging Markets has been managed by Richard Titherington since March 2005. With gross assets of just under £460 million, it is also reasonably liquid for a specialist fund. Up from sixth place last year, it replaces another JPMorgan fund, JPMorgan Russian Securities, as winner of this category. In addition, the runner-up was another JPMorgan Fund, Euro Fledgling, and JPMorgan Indian also made the shortlist, demonstrating the group’s considerable emerging market expertise.

Drawing on the resources of JPMorgan’s global team, Titherington’s fund seeks to maintain a diversification by not having more than 50 per cent of its assets invested in any one region. It is therefore a very broadly spread portfolio, with around 20 markets currently represented. Major country exposures are Brazil (18 per cent), South Africa (13 per cent), India (11.5 per cent) and China (11 per cent), Key sector weightings are Financials (18.5 per cent), Telecommunication Services (15 per cent), Consumer Staples (14.5 per cent), Materials (13 per cent) and Energy (12 per cent).

The performance of the fund was all the more notable because last year was a difficult time for emerging markets portfolios, although conditions are significantly improving.

Titherington points out that ‘Following a savage period of underperformance from May 2008, emerging markets have outperformed since the end of last October. However, we expect the asset class to remain volatile in the near term.’

He adds, ‘While valuations continue to appear supportive, the sustainability of earnings will remain the key focus for our stock selection. We look for companies that can deliver growth over our long-term investment horizon and will likely benefit from a rerating in valuations when market conditions revert to normal.’

Despite this volatility, Charles Cade noted the very consistent returns of the top three funds in this category. Nigel Sidebottom observed that ‘JPMorgan Emerging Markets has been consistently good in a volatile asset class’, while looking at the runner-up, ‘JPMorgan Euro Fledgling has achieved excellent five-year returns against the shortlist and has been outstanding within its own peer group.’

Tim Cockerill highlights the performance of both the winning JPMorgan fund and Templeton Emerging Markets, in fourth place. ‘These funds are the two main players in the emerging markets space and they tend to flip between each other as to which is top at any given time. The point about JPMorgan emerging markets is that it is a good-sized investment trust, which gives investors reassurance, especially when you are dealing with the potentially volatile area of emerging markets. In addition, it is a solid, well-managed investment trust that has built up a good track record over a long period of time.’

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Most Consistent Investment Company
Murray International Trust
It shouldn’t come as a surprise that the award for most consistent closed-ended investment company should be fought out between the winners of our generalist and specialist awards.

In the end, Murray International came out on top, by virtue of its steady appreciation over a number of years. Having come third in the generalist category last year, Bruce Stout and his team kept the momentum going during a difficult period for global stock markets. Indeed, for Charles Cade, the key to Murray International’s success is that it has ‘consistently anticipated key market trends’.

Similar sentiments applied to JPMorgan Emerging Markets, with the judges appreciating its ability to deliver outperformance during a particularly volatile time for emerging markets.

In third place is the utility specialist Ecofin Water & Power Opportunities. Cade says that this portfolio has seen ‘strong value added, via specialist strategic investments and thematic calls, such as the consolidation in the UK water industry.’

Mention should also be made of last year’s winner, BlackRock World Mining, which came fourth this year, another specialist fund that has coped extremely well with volatile conditions in its particular market.

Just outside the top five was TR Property, a former winner of this category and a fund that has been on the shortlist ever since this award was introduced, which underlines the consistency of its returns. Charles Cade explains that this record derives from the fact that the trust has ‘consistently added value via stock selection and arbitraging direct property and equities’.

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