Length of tenure is one of the important attributes we consider when undertaking our assessments of fund managers’ capabilities. A fund manager who’s been working in the same or similar roles for their current employer for a meaningful length of time can be expected to be thoroughly familiar with all the firm’s processes, investment philosophies, and approach to risk management. They should also be fully on top of all the stocks in their portfolio, and the rationale for why they’ve been included.
A reasonable length of tenure also means that the fund manager will have experienced different stages of the market cycle, including market conditions both favourable and unfavourable to the style of investing they’re running, and in which different companies in their portfolio have flourished and been down in the dumps.
Tenure’s also important because, as well as market-capitalisation and investment style, it gives us more insights into why funds have performed the way they have, and whether current headline performance numbers are representative of the people currently running a fund.
A cursory glance at the headlines in investment publications in recent years has shown that this is likely to be the exception, rather than the rule. Not a week seems to go by without news of a key individual – or in some cases, entire teams – moving to another institution or establishing a boutique business in which the funds management talent also has an ownership stake.
With this in mind, who are the longest-tenured managers of large-cap share funds? By “longest-tenured” we mean the people who’ve been running the same fund(s) for more than seven years. That may not sound like a long period of time – it’s only a year before the last domestic bear market in 2002, for instance – but relatively few funds have enjoyed such consistency in management.
John Kightley, Maple -Brown Abbott (1994- )
John Kightley’s been involved in managing Maple- Brown Abbott’s portfolios since 1994. Kightley is happy to take contrarian positions, using traditional valuation metrics such as price/earnings, price/cashflow, and dividend yield to identify underappreciated companies. Maple-Brown Abbott’s low turnover is a distinct advantage, as high levels of trading can have unpleasant tax consequences for investors.
Martin Litler, Colonial First State Core (1996- )
In March this year, Colonial First State’s Martin Littler passed his 12th anniversary running Colonial First State’s Core Australian shares funds. Although not as high-profile as Colonial First State’s Growth share funds, Littler’s produced top-quartile returns for his investors over every time period through to April 30, 2008, doing so while producing lower volatility than the average for blend-style funds, and deservedly achieving a five-star rating.
Paul Xiradis, Ausbil Dexia (1997- )
Paul Xiradis has now clocked up 11 years leading Ausbil Dexia’s investing activities. Xiradis and his colleagues blend industry and macroeconomic analyses to identify sectors which look the best candidates for sustained earnings growth, and then undertake detailed research on individual companies. The shop was, for instance, one of the first fund managers to move heavily into resources stocks such as Zinifex, Rio Tinto, and BHP Billiton, which continues to play out nicely for Ausbil’s investors.
Doug Little, Constellation (1999- )
Doug Little has headed boutique Constellation Capital since the shop was founded in October 1999. As well as its own investment mandates, Constellation has, since June 2004, been the underlying investment manager for Zurich’s domestic share funds. Market conditions over the past few years have not been favourable for Constellation’s approach to investing, which could be described as pragmatic rather than deep value. This characteristic has helped Constellation fare better than many of its value-style peers, though, which has benefitted Zurich share fund investors. Constellation’s low turnover is an advantage, too.
Rob Osborn, Lazard (1999- )
Lazard’s Rob Osborn has run the firm’s concentrated value investing style for nearly 10 years. Osborn’s been through testing times in recent years – Lazard’s investment style is deeper value than almost any other in Australia. The firm screens the sharemarket for beaten-down names, paying particular attention to a company’s earnings yield relative to the market, and investing in a pretty tightly-held portfolio of about 35 stocks. Osborn and his colleagues are systematic and patient investors. Their time will come again.
Bob van Munster, Tyndall (1999- )
Bob van Munster is another who’s notched up nearly a decade heading his employer’s share investing efforts. As is the case with Lazard, the state of the sharemarket over the last few years has not been conducive to Tyndall’s value style of investing, although in this case, Tyndall’s more flexible approach helps the house cope with these conditions better than many other value shops, and Tyndall has as a result been a consistently top-quartile performer among large-cap value-style share funds.
Michael Anderson, AMP (2000- )
Michael Anderson has been running AMP Capital Investors’ socially responsible funds since August 2000, and has played a key role in the development of both the firm’s socially responsible offerings and the ethical investment industry in Australia over these eight years. AMP combines both sustainability factors and financial analysis in an approach the firm dubs “sustainable growth at a reasonable price”. It’s a formula that’s disproved the often-heard view that socially responsible investing can’t come with competitive performance, as the fund’s been a consistently top-quartile performer.
Richard Douglas, Concord (2000- )
Concord Capital’s Richard Douglas has been overseeing the firm’s investment team and processes since 2000, when Concord evolved out of the Lend Lease funds management business. Douglas’s role is a bit different from the others we’ve discussed so far – his job is more about overseeing and drawing on individual portfolios run by his five portfolio manager colleagues than leading stock picking himself. Although the version of the fund offered through the Macquarie Professional Series has only been in existence since October 2005, Douglas has been running the same approach for the past eight years.
John Murray, Perennial Value (2000- )
John Murray founded Melbourne boutique Perennial Value, one of the Perennial family of funds management boutiques, in 2000, having worked previously at Westpac, Maple-Brown Abbott, and Perpetual. At the heart of Perennial Value’s approach to investing are strong fundamental research and a strict relative valuation discipline. Murray and his colleagues seek out companies trading at discounts to the market and their peers, and which possess sustainable businesses. This valuation rigour means that Murray will lag the market in a growth-fuelled environment – like that we’ve seen over the past few years – but he’s proven his worth over the longer term.
Mark Himpoo, BlackRock (2001- )
Under Mark Himpoo’s leadership, BlackRock has in recent years engineered major process improvements which are now translating into sustained healthy performance for investors in his funds. The people around him have come and gone over the past seven years – half the team left two years ago to launch a boutique, for instance – but Himpoo has been the constant here, and he’s worked hard to reconstruct the team. He’s also steered a steady course despite the distractions from the merger of the former Merrill Lynch funds management business with BlackRock last year.
Lee Mickelburough , Perennial Growth (2001- )
Our final longest-tenured manager is Lee Mickelburough, who since 2001 has led the efforts at Perennial Growth, another of the Perennial funds management businesses. Mickelburough and his colleagues learned some hard lessons in the aftermath of the market downturn at the start of this decade. He subsequently introduced greater rigour to the process, in particular placing greater emphasis on valuation and identifying sustainable growth than was previously the case. Although these enhancements won’t be tested thoroughly until the next sustained downturn for growth-style investing, this is still a great example of a portfolio manager learning lessons from experience and translating this into process improvements of benefit to investors.