Figures from Financial Express Analytics show that the three Marlborough funds run by Hargreave have each lost more than -24 per cent over the last 12 months. The funds have, however, outperformed the IMA Smaller Companies sector.
Performance of Hargreave managed funds over last twelve months
Source: Financial Express Analytics
Subject to FSA regulatory approval, the long/short onshore OEIC vehicle will launch in the summer with a global multi-cap and multi-asset mandate.
The fund will be a high-conviction portfolio of between 25 and 50 stocks and will be seeded with £5-£10m of internal money. Hargreave says the vehicle will not be heavily marketed and although it is available to retail investors it is primarily for the use of the group’s existing clients.
Hargreave says he decided to launch the Marlborough Diversified Absolute Return fund after he became frustrated with running long-only mandates.
"It will be completely flexible. Long only funds are a bit hamstrung as to what they can or cannot do. I have had to stay 80 per cent invested in small caps and the falling equity market has really restricted our options. This structure is much more flexible, will exploit more opportunities in the market, and I think there is going to be a lot of interest in these type of funds," he said.Hargreave’s planned fund launch comes during a period of intense debate about absolute return with Cazenove Capital Management identifying a number of recently launched absolute return funds as ‘absolute disaster’ funds.
According to data available on Trustnet, the last six months have continued to challenge the sector, with a number of funds recording negative returns, including Cazenove UK Absolute Target fund, and the BlackRock Absolute Alpha fund which have returned -4.4 per cent and -0.7 per cent respectively.
Only seven recorded positive returns, although there is still a wide differential between the best and worst performers, for example, the Octopus Absolute Return fund returned 18 per cent while Way's EFA fund returned -8.7 per cent.
Returns - 6mth
Source: Trustnet.com
However, Hargreave is confident that the Marlborough absolute return vehicle will be able to exploit current market conditions to be one of the better performing funds in the sector.
He says: "We are not going to be very sophisticated. It will be quite simple stuff. We are not going to gear but we will have a few strategies and shares that we really like and we will trade them.
"As long as you don’t mind owning the share you can buy it and when it goes up you sell it and when it goes down you buy it back again. That works well in these sorts of markets as opposed to bull markets when you want to buy and hold. In these markets buy and hold has not been such a great idea. Buy and trade is a much better idea."
In addition, Hargreave’s own track record as a Trustnet Alpha Manager would appear to suggest that the new fund has a good chance of being a success.
According to the Alpha Manager Ratings, Hargreave has outperformed his peer group in seven out of the past nine years, in both rising and falling markets. He has managed to outperform peers in three out of four years of rising markets, and four out of five years of falling markets.
The outcome for investors is clear, according to the Trustnet data: across the entire period in which Hargreave has been in charge of funds, investors would have earned an average return annually of 6 per cent - even taking into consideration years when the markets overall were falling.
Hargreave v peers
Source: Trustnet Alpha Manager Ratings