A tale of two fund managers.
Every long-serving fund manager sees the best of times and the worst of times, and this certainly applies to my two favourite unit trust managers, Neil Woodford and Philip Gibbs.
Last year was the season of light for Philip Gibbs, manager of Jupiter Financial Opportunities, who didn't just see the credit crunch coming, but actually did something about it, ducking out of equities and into US treasuries. Astonishingly, his fund actually rose during the banking crisis, and throughout 2009.
But it was the season of darkness for Neil Woodford, who was in for unaccustomed stick after his Invesco Perpetual Income and High Income funds seriously underperformed both the FTSE All-Share and UK equity income & growth sector.
Now the roles are reversed. Woodford is entering the spring of hope, Gibbs is in the winter of despair. Charles Dickens would have understood, because this really is A Tale of Two Fund Managers.
So how does it end?
This time last year, I wrote that Philip Gibbs was My Favourite Fund Manager. I still love him to bits, but our relationship has been through a sticky patch.
Over the past 12 months, his fund has fallen 4%, while his benchmark specialist sector has risen 18%, according to Trustnet.com. I can forgive this minor transgression, but I have to say I'm surprised.
A major factor was the euro zone sovereign debt crisis, which did financials no favour, and he has struggled to regain lost ground since.
In April, he hit the headlines after moving 52% of his portfolio into cash, over concerns that the market wasn't fully pricing in Club Med risks, and the threat of higher bond yields in the UK, US and Japan.
It was a bold move, maybe too bold, but this is a man who likes to make big calls. In June, Gibbs and co-fund manager Guy de Blonay halved their US exposure from 26% to around 13% of their £1 billion portfolio, clearing out the likes of JP Morgan Chase and Bank of America, and replacing them with Chinese banking stocks.
In July, Gibbs dumped cash and ditched gold. He is currently making another big call, by ploughing his portfolio into banks, placing nearly 5% of his fund in Lloyds Banking Group (LSE: LLOY).
Now that's what I call an active fund manager. Trouble is, it hasn't worked, Jupiter Financial Opportunities is trailing over the last one, three and six months.
Is Gibbs trying to be too clever in timing the market?
I wrote about Neil Woodford's difficulties back in February, in my article Everybody Loves Neil Woodford.
At the time, the great man found himself in the awkward position of being a fourth-quartile manager, and although he won't have liked that, I doubt he will have been overly worried either.
Woodford trusts his own ability, instincts and strategy, and unlike, er, me, he doesn't panic when his investment tactics backfire. This is the man who spurned the dot.com boom and (like Gibbs) foresaw the credit crunch, so he is right to trust his own judgement.
The good news is that if you stuck by him, it looks like you were right as well.
I certainly stood by him, pointing out that Woodford had been rudely trampled in last year's dash for trash. During that frenzied period, the mob had little time for defensive sectors such as pharmaceuticals, tobacco, utilities, telecoms and defence, and Woodford cut a lonely figure by loyally sticking it out.
But this year, when everybody calmed down and remembered the virtues of dividend-generating blue-chips, Woodford was already there.
Invesco Perpetual Income fund is up 15.6% over one year (against 14.5% for the UK Equity Income benchmark). That's a solid, if unspectacular, performance, which is exactly what you want and expect from his fund.
The big man is back.
They be giants
So is Woodford going directly to heaven and Gibbs going the other way, to misquote Dickens again?
Not in my book. Over five years, Woodford has returned 40% against 14% for his benchmark, and Gibbs has returned 57% against his specialist benchmark of 41%.
Both fund managers have seen moments of light and darkness, hope and despair, but I'm confident of this: in the long run, you will do a far, far better thing investing in them, than you will ever do with the vast majority of fund managers.
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