Fool's Eye View

[ March 3, 2000 ]

Bye Bye Tony Dye

By James Carlisle (TMFJimmyC)

After week-long rumours, it has finally been confirmed that Tony Dye will be leaving the pension fund manager Phillips & Drew. I shall miss his face in the newspapers. Although I have frequently felt incensed that he has lost so much pensioners' money recently, he certainly fired the debate.

Tony Dye was chief fund manager at Phillips & Drew and is famous for being a "value investor". I can't remember when he first declared that the market was absurdly overvalued, but it seems many years ago now. Perhaps it was 1995. Since then, every time these ridiculously overvalued technology stocks have powered the market further ahead, he has been there, an increasingly comical figure, muttering about how silly it all is.

Comical perhaps for casual observers like me, but very serious indeed for those that have entrusted money to him. One must not diminish the responsibility he has carried. It is this responsibility which has caused other fund managers to adopt a style which will ensure that they never depart from the performers of others by too much. Many (including me) have said that this closet-tracking is a bad thing and that Mr Dye should be admired for sticking to his guns. However, those who have given him the money to invest will be complaining of head-in-the-sand arrogance.

Mr Dye's supporters say that he will eventually be proved right. In fact, they've been saying it for so long that it has become a bit of a cracked record. In any event, it would require one hell of a crash now to prove him right. Even if that occurred, I bet he wouldn't take the opportunity for a belated entry to the technological band wagon and it would be everyone else's turn to explain how they will end up being right.

Despite £8b worth of pensions business walking out the door last year, the policy at Phillips & Drew is not going to change. Yesterday, they were bandying around some daft analysis which purports to say that the average technology company must grow at 40% per annum for the next ten years. It makes no sense to say, in one breath, that you are an investor in fundamental long term value and then, in the next, that that value stops after 10 years.

Since Phillips & Drew have been adopting their strategy, the long bond yield has fallen substantially (although it has been ticking up a little recently) and this puts a much higher value on more distant earnings. It just is not good enough to say "you can't place any value on forecasts more than 10 years away because it is too difficult". Difficult it may be but, if you want to outperform the stock market over the long term, you are going to have to try.

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