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We name the most ‘defensive’ managers

There is no shortage of hotspots around the globe at the moment. The situation in Iraq and Syria is currently at the forefront of the headlines, but continued violence in Ukraine remains an ongoing concern.

Jason Hollands Jason Hollands
17 June 2014

You might therefore expect these and other factors to have provoked major market jitters. However, market volatility has been incredibly low in recent months, with the VIX Index, a measure of US stock market volatility, at its lowest levels in a decade.

Officials at the US Federal Reserve Bank have begun to wonder whether there is too much complacency over risk and some investment commentators are opining as to whether sanguine markets might represent the “calm before the storm”, pointing to a drop in volatility in 2007 on the eve of the credit crisis.

In reality none of us has a crystal ball to tell us what markets will do over the short term. We remain positive on the outlook for equities over the next few years and the longer term. However, after the strong returns on developed stock markets in 2013 which has propelled some stock market indices to record levels, the near term outlook is less clear.

With this in mind, we have taken a look at which equity fund managers have in the past performed well when markets have turned bumpier. Using our proprietary database of fund manager career track records, we have identified those fund managers with track records of at least 10 years in a particular sectors who managed to beat their sector indices a high percentage of the time in months when the indices fell.

Of course it is important to stress that the analysis below is entirely based on the past, which is not necessarily a reliable indicator of the future and does not mean these are managers who will necessarily deliver outperformance in the good times as well.

There are a number of reasons why a fund manager or team may have performed relatively well in down markets. These include:

-          A focus on higher yielding companies. The ability of a company to generate a decent dividend is often a sign that the business is in rude financial health, with good cash flow. In tougher times higher yielding shares are seen as particularly attractive as the income provides some compensation for share price declines.

-          Willingness to allocate into cash. Some managers may be more adept at raising cash weightings in their funds when markets are going through down periods than others. These means they perform relatively better than fund managers who are fully invested.

-          Value investing. A number of the managers identified have a strong emphasis on investing in companies they believe are undervalued and avoiding high growth businesses that they believe are expensive compared to  current earnings levels. When markets go through bearish phases, it is often more speculative growth companies that are hit hardest.

-          Luck. When we research funds, a key goal is to assess whether an good track record is down to skill or luck

 

UK Equity “Defensive” Managers

 

 

MANAGER

IMA SECTOR

OUTPERFORMED IN DOWN MONTHS

CURRENT FLAGSHIP FUND

RATED?

1

Mark Barnett

UK Equity Income

76.8%

 

2

John Wood

UK All Companies

75.9%

 

3

Colin Morton

UK Equity Income

74.7%

 

4

Richard Hughes

UK Equity Income

73.7%

 

5

Stephen Bailey / Jan Luthman

UK All Companies

72.4%

 

6

Carl Stick

UK Equity Income

71.8%

 

7

Neil Woodford

UK Equity Income

71.6%

 

8

Graham Ashby

UK Equity Income

69.6%

 

9

Martin Cholwill

UK Equity Income

68.3%

 

10

Mark Slater

UK All Companies

68.3%

 

 

UK SMALLER COMPANIES “Defensive” Managers

 

 

MANAGER

IMA SECTOR

OUTPERFORMED IN DOWN MONTHS

CURRENT FLAGSHIP FUND

RATED?

1

Simon Knott

UK Smaller Companies

80.4%

 

2

Andy Brough / Rosemary Banyard

UK Smaller Companies

76.9%

 

3

Paul Marriage

UK Smaller Companies

76.6%

Closed

 

EUROPEAN “Defensive” Managers

 

 

MANAGER

IMA SECTOR

OUTPERFORMED IN DOWN MONTHS

CURRENT FLAGSHIP FUND

RATED?

1

Vincent Devlin

Europe ex UK

76.5%

 

2

Alex Darwall

Europe ex UK

75.4%

 

3

Feras Al-Chalabi

Europe ex UK

71.4%

 

 

ASIA (EX. JAPAN) “Defensive” Managers

 

 

MANAGER

IMA SECTOR

OUTPERFORMED IN DOWN MONTHS

CURRENT FLAGSHIP FUND

RATED?

1

Angus Tulloch

Asia ex Japan

70.8%

 

2

Aberdeen Asia Equities team

Asia ex Japan

69.5%

 

3

Matthew Dobbs

Asia ex Japan

68.3%

 

 

JAPAN “Defensive” Managers

 

 

MANAGER

IMA SECTOR

OUTPERFORMED IN DOWN MONTHS

CURRENT FLAGSHIP FUND

RATED?

1

Morant Wright team

Japan

67.4%

 

2

Andrew Rose

Japan

65.7%

 

3

Stephen Harker

Japan

61.3%

 

 

US EQUITIES “Defensive” Managers

 

 

MANAGER

IMA SECTOR

OUTPERFORMED IN DOWN MONTHS

CURRENT FLAGSHIP FUND

RATED?

1

Tomas Forsha / Henry Sanders

North America

73.8%

 

2

Gordon Grender

North America

63.4%

 

3

Mick Brewis

North America

61.3%

 

 

For more information on the funds currently run by these teams, click on the fund name for our analysis.

The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Past performance or any yields quoted should not be considered reliable indicators of future returns. This article does not constitute personal advice. If you are in doubt as to the suitability of an investment please contact one of our advisers.