Star v teams: who is managing your money? What Investment looks at the different approaches to fund management

What Investment, March, 2003

Ensuring investors feel secure is a key part of investment management agrees Paul Dellar, head of product management at DWS Investments. Part of this is assuring investors that the person looking after their money is there for the long haul.

"We've been remarkably successful in this and the average length of service of our core UK team is 12 years," says Dellar.

"Our approach is based on small teams of individuals who come up with the core ideas--they set the debate and generate our investment ideas as a team. All the stocks we research are ranked against their peers and given a score that reflects our level of conviction. These ideas and recommendations are shared with our fund managers around the world through a system called GERP--Global Equity Research Portal.

"What we wouldn't want to do, however, is to remove the potential for individual flair. So although all our funds have a high degree of commonality with our model portfolio each fund manager has the scope to reflect their own ideas in the funds that they manage."

Investor perceptions

It's very hard to promote the team approach in the retail world, says Peter Harrison, managing director, head of global equities at JP Morgan Fleming. Investors, he says, like to be able to look into the whites of the eyes of one individual.

"However, I genuinely believe the team approach is the best way--it's an approach that the institutional market has always followed, one that produces a cordial office atmosphere, and one that, I believe, leads to fewer manager defections." The global team at JPMF has, on average, been with the company for 13 years.

"Our managers leave their egos outside the door. We work to one set of ideas that is produced through ongoing discussion between members of our teams."

Like Fidelity, JP Morgan Fleming is proud that it creates its own pool of talent within the company. When a fund manager leaves Fidelity, nine times out of ran they will be replaced by an internal candidate.

Morrison adds: "A common misconception is that if you're not promoting 'stars' your managers must be 'average'. That's not the case. Our managers are happy not to have their faces splashed all over the place--it puts an unnecessary pressure and emphasis on one individual."

Lessons learnt

When it comes to investment decisions it is, naturally, a case of horses for courses. But basing an investment strategy on the fortunes of one individual is the riskier option.

"Although individuals may head up the management of a portfolio, their individual impact is hard to differentiate from other influences," says Dellar. "Whilst Michael Owen would be a great striker irrespective of which team he played for I doubt his goal tally would be so impressive if he played for Leyton Orient. But unless he makes this dream transfer it's difficult to speculate how he'd adapt to life in the third division and to the lesser service (one suspects) he'd receive from his team-mates."

Greater risks, however, often equate to greater returns. Many investors like the idea of a strong individual imprinting their moniker on a fund and it's been proved that this approach can provide spectacular results. You pays your money and you takes your choice!