"WAY AHEAD WITH A NEW BREED OF MANAGERS"

Photo left: Paul Wilcox (WAY Group)

Paul Wilcox, technical director and chairman of the WAY Group, is questioned by Frances Hughes of Fund Strategy ...

Q: The WAY Mixed Asset (MA) Growth Portfolio, managed by Jason Britton at T. Bailey, was launched two weeks ago and the WAY MA Cautious Portfolio, managed by John Husselbee at North Investment Partners, is [subject to FSA approval] due to be launched at the beginning of May. What is the reasoning behind these new funds?

A: It is to give clients more choice. We feel it is right we offer investors more options. It is unfair to ask people to commit to long-term investment strategies if we have a narrow fund range. That is why we never considered removing IMS (Investment Management Selection) at all. IMS manage our existing funds of funds range. We want to give people a number of managers, but more than that, several styles. The two new managers [Britton and Husselbee] are conviction managers. If you have somebody who wants a cautious approach [for example], it would be handy to have some options in the Cautious [Managed] sector. Investors can move from one cautious portfolio to another. Whichever style or risk level they are interested in, we will be able to give them more options.

Q: What is the difference in management style between the new funds and the established range?

A: IMS are at one end of the spectrum because they are conventional managers. We wanted to go to almost the other extreme [with the new funds] and take them to people who are conviction orientated but have developed a great track record and reputation. [Britton and Husselbee] are conviction orientated and work for independent boutiques. They only manage funds of funds and they represent a new breed of managers.

Q: What do you mean by "new breed"?

A: As regulations have changed and funds are permitted to invest in a variety of asset classes and more esoteric vehicles, these two managers have embraced the new rules - such as structured products and ETFs (exchange traded funds). ETFs can be linked to all sorts of markets. The new breed of manager is open to new structures, new techniques and new vehicles, the most contemporary types of vehicle.

Q: The MA Growth Portfolio is an aggressive, high conviction portfolio. Is there much demand for this type of fund from your clients?

A: A lot of clients are showing great interest in the new fund. There have been some switches so people can diversify their growth holding and split their investment between the IMS Global Growth fund and the MA Growth fund. They are very complementary. We do not anticipate a major migration from our funds. These new funds are supplementary.

Q: Do you envisage clients holding both ranges within their portfolios, then?

A: Yes. Most clients will finish up with a mix of traditional and contemporary. That is our objective. IMS will continue to manage the core of our investments because most investors do want robust, traditional fund performance. The IMS funds are traditional in that their portfolios do not vary dramatically from standard sector weightings. They add value through selecting good managers.

Q: Can you explain the investment process behind the MA Growth portfolio?

A: Jason has three strands he brings together. The largest is the core holdings [strand]. In the core holdings he will be investing in global funds, about half a dozen really good global managers. He will use the conviction strand to play out his convictions - for example, an agricultural ETF or Brazil ETF. It allows him to follow what he considers to be the better value prospects around the world. It could be geographical or sector [based] or he could simply be backing currencies. He can see what trends are developing around the world and ride these trends. The third strand will be the smallest. It is what he calls "alternative", [such as] hedge funds, guaranteed, absolute and structured products or fixed interest funds. It's to give him a basket of things that are non-correlated to the equity markets. By blending these three strands and bringing in some alternative investments he will bring the risk level down.

Q: What is the percentage split between the three strands?

A: He has given himself some large margins. The core and conviction strands can go from 10% to 65% [each]. The alternative strand can go from 0% to 25%.

Q: There is a large weighting to America in the portfolio, almost 30%. Is this position typical of how the fund will be managed? Do you think some investors will be put off by this high conviction style in today's markets?

A: If he is confident with it, we are confident with it. I know Jason has been a fairly long-term bear of America, but a weak dollar combined with their great industrial base means that exports are shooting up. There is a great opportunity to bottom-fish some bargains and performance in due course is likely to enjoy the added kick of currency recovery.

Q: Are the launches a drive to increase WAY's assets under management?

A: It is a two-pronged thing. We have had a number of IFAs say they want us to have more funds. If our customers are telling us they would like a wider range of funds, we cannot ignore them. That will probably lead to larger assets under management.

Q: You have said you expect to get £20m of investment into the new MA Growth Portfolio in the next six months? Do you think the fund will find it hard in these market conditions to attract investors?

A: We have had a lot of interest in the MA Growth portfolio. But there is a lead-time. We think it will be a gentle increase [and] we have never seeded any of our funds. I do not anticipate a stampede because of the environment. [But] I do not think it is a bad time to launch, I think it is superb timing. We have launched this growth fund at a turbulent time. It is a great time to be buying. We will benefit from the performance.

Q: Once both the MA Growth and MA Cautious portfolios are launched, are you likely to launch another fund somewhere in between?

A: Yes. We will be launching a Balanced portfolio in due course. But first we will see how these launches go and see what demand there is.

Q: Why did you choose individual managers for the new funds rather than choosing a fund group to take on the range?

A: Smaller boutique managers tend to be good at a particular style of investing. With the contemporary range, we wanted to match the manager to the fund. The IMS team has more than 40 people working in the City. They run a team approach. Small boutiques tend to have a specialisation and we are tapping into these specialisations. Jason Britton, for example, is good at recognising trends early.

Note: PAUL WILCOX is technical director and chairman of the WAY Group. He joined the investment industry more than 30 years ago, initially as an IFA and portfolio manager, latterly as product designer and marketeer. He established WAY in 1996.

- Ends -

 Website link: T. Bailey Asset Management Limited

 Website link: Investment Management Selection (IMS)

 Website link: North Investment Partners

Press Release Date: 2nd April 2008.

Please Note: The above commentary was first published by fundstrategy, dated 31st March 2008. Reproduced with kind permission.