Twitter icon Email alerts icon Latest News RSS icon Magazine icon Stay connected:

View the article online at http://citywire.co.uk/wealth-manager/article/a754762

Rathbones' Coombs: 'If Dobell had a trust, we would buy tomorrow'

by Danielle Levy on Jun 05, 2014 at 08:06

Rathbones' Coombs: 'If Dobell had a trust, we would buy tomorrow'

Rathbones' head of multi-asset investments David Coombs has called on star managers to resist distribution pressures placed on them on account of the impact that size can have on performance.

It is an issue that Rathbones' fund selection team historically identified with Tom Dobell, which motivated them to sell out when the M&G Recovery fund was top quartile. Dobell's performance has since struggled and over the past three years it has returned 11.9% versus 31.9% by the UK All Companies sector.

Coombs, who manages the Rathbone Multi Asset Total Return and Strategic Growth funds, says Dobell's underperformance does not suggest that he has become less skilled as a fund manager, but rather the environment in which he was running money changed. He added that he has faith in Dobell's skill and would back the manager if M&G launched an investment trust or capacity constrained fund for him in the future.

'He was generating his alpha from mid and small caps and we knew that from 2008 there was far less liquidity because bank prop desks were withdrawing from the market. We have seen the same thing over the last six weeks, mid caps have really been struggling,' he explained.

As Dobell attracted billions and ended up running a much bigger fund, Coombs noted that Dobell was limited in his ability to hold the stocks where he had historically added value.

'If Tom Dobell launched an investment trust or a new fund tomorrow which was capacity constrained, we would definitely buy it,' he added.

Coombs was keen to stress that Dobell is not alone and this represents a big industry issue.

'The problem is that star managers lose control of the portfolios because the distribution side takes over as the priority and weakens the performance. It is important that those managers that suddenly find themselves "hot" keep control and push back a bit on the distribution side of the business. There should be a healthy conflict between distribution and investment management. What we see for all sorts of reasons is that sometimes the balance just gets slightly awry,' he said.

His sentiments are echoed by Mike Webb, chief executive of Rathbones Unit Trust Management (RUTM), who said more chief executives should take the decision, however difficult, to close funds or limit capacity.

'In today's information age and being able to move information around very quickly, what you find is businesses grow assets very rapidly, unable to manage those to the same extent...If you are a big company or major asset management group you still have to feed the beast.'

Sign in / register to view full article on one page

1 comment so far. Why not have your say?

Victorian Assets

Jun 05, 2014 at 09:13

It is all very well for David Coombs to bemoan the logical desire of the CEO's of fund houses to maximise their asset gathering potential by flooding successful mandates, but to my mind the blame for this lies FIRMLY at the door of Fund Buying Supremos of large wealth managers like himself. The consolidation of the wealth management industry and centralisation of fund buying decisions has meant that the likes of Rathbones can ONLY invest in huge funds (to the almost total exclusion of smaller managers). Furthermore, the pressure on fees and the knee-jerk reaction against performance fees (understandable in the immediate aftermath of the GFC, but set up right is the most effective way of aligning the manager with client outcomes) has meant that the funds' industry HAS NO CHOICE but to go big and take full advantage of star fund managers' performance. The consequence of the huge consolidation in the wealth management industry (the reasons for which are well known) is having the effect of almost entirely withdrawing the oxygen which once provided grub capital for start up funds to get going; withnout which the Neptune's, LionTrust's, Artemis', Guniness, Odey's of today would never have got going. I politely suggest that it is Mr. Coombs and his CEO that should be the ones sitting down and understanding that it is their actions that lie at the heart of the problem identified in the article, and beyond. Ultimately none of it is to the long term benefit of the underlying investors and their returns which must suffer.

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Sponsored Video: Bringing it all back home


As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

Investing for income in a changing environment


With talk on interest rates on the horizon, our latest roundtable debate covers income investing against a changing backdrop

More about this:

Look up the funds

  • M&G Recovery I Inc
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Rathbone Multi Asset Strategic Growth Inc
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Rathbone Multi Asset Total Return Inc
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Look up the fund managers

  • David Coombs
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Tom Dobell
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

Archive

On the road

Click here to find out more from the Audience Development team.

Sorry, this link is not
quite ready yet