Many experts argue that the star manager culture in the UK is problematic, but Dampier says there are a few managers who stand head and shoulders above the rest, making them well worth the attention they get. "I don’t like the phrase 'star manager', I loathe it," he said. "But there are a selection of people who are, to use a football analogy, star players. Like any industry there are top people. [Anyone who says] the fund is bigger than the fund manager, that’s baloney."
Experts often say it is not a good idea for investors to commit too much of their money to a single fund house or asset manager. The value of this statement has been underlined several times this year, first when Richard Buxton left his UK Alpha Plus fund at Schroders and then, more shockingly, when Neil Woodford announced he would be heading out of the door at Invesco Perpetual.
Both managers are considered stars in their field and many investors had allocated a great deal of money to each one. Neil Woodford alone managed £33bn before the announcement of his departure, an amount that would make him the second largest asset manager in the UK were he to take it all with him to his yet unknown new venture.
Yet Dampier says sticking with managers such as Woodford and Buxton is exactly what investors should do.
"The fund manager is the most important factor," he said. "There are only a few fund managers that have done well over the years while most have fallen by the wayside. That’s why we started the Wealth 150 list, which is down to 93 funds now, so that should tell you something."
"But there are managers such as Nigel Thomas and Neil Woodford who over the long-term have been more than lucky. There are a number of fund managers worth following."
FE Alpha Manager Nigel Thomas’s AXA Framlington UK Select Opportunities fund has smashed the returns of the average IMA UK All Companies sector over 10 years, returning 222.77 per cent to an average of 132.72 per cent for his peers.
The FTSE All Share has made 138.47 per cent in the same period.
Performance of fund vs sector and benchmark over 10yrs
Source: FE Analytics
Along with Woodford’s Invesco Perpetual High Income his fund was recently named one of our managers of the decade.
Schroder UK Alpha Plus was similarly impressive during Buxton’s tenure, returning 242.66 per cent over 11 years to the All Share’s 116.37 per cent. The average IMA UK All Companies fund made 116.37 per cent.
Performance of fund vs sector and benchmark over 11yrs
Source: FE Analytics
In the case of Buxton, Dampier says the manager had a particular style of running money and that the Schroder UK Alpha Plus fund was his own invention.
"If you want that particular way of running money, then you have to follow him," he said.
However, Dampier says it is too early to shift money away from Woodford’s Invesco Perpetual High Income and Invesco Perpetual Income funds because there is no clear home to go to.
He adds that Mark Barnett, who is taking over Woodford’s flagship funds, has been at Invesco for more than 17 years. While Barnett has naturally been overshadowed by his better-known colleague, he now has a chance to prove his worth using a process he has been running alongside Woodford for close to two decades.
Dampier admits it is difficult to tell who the star managers will be early on. Instead, he looks for managers who have at least a five-year track record before he can truly tell whether their style will pay off in the long-run.
Before this, he uses a quant screen to determine whether a fund manager is adding value, something he says not many of them do.
"It’s near impossible to spot on day-one [which managers will outperform]. The typical three years that most IFAs look for is nowhere near long enough," he continued.
"Some managers look wonderful over that period but they likely just rode something that was already there, and that’s what you would have got with a passive fund."
Dampier adds that many of the star managers in the UK have already been inundated with massive fund flows, causing several of the best ones to close. These include Fidelity UK Smaller Companies, First State Global Emerging Markets Leaders and Trojan Income for starters.
Dampier says there is still a role for active management because these funds have the ability to shift gears when the economic climate changes, unlike passive funds which will rise and fall with the whims of the market.
However Brian Dennehy (pictured), managing director at Dennehy Weller & Co, says the star manager culture is simply a distraction from the key questions investors should be asking themselves.
He says the first port of call for any investor should be their own objectives and risk tolerance rather than the reputation of a single manager. "Fund managers are not what people should be focusing on at all. Fund managers are just caretakers of funds. People buy funds, not fund managers," he said.
"When it comes to funds, it’s all about performance. What performance you want to look at depends on what type of investor you are."
Dennehy argues that fund manager ratings are irrelevant to what is already a complicated fund selection process. He adds that moving money when a manager leaves a fund is often a poor idea.
"In 30 years we have never known any good fund (that is to say one we recommend) becoming a bad fund due to a change in management," he said.
"Fund managers come and go, they are caretakers. They have processes (some more formal than others) which can comfortably be continued by another manager."
"If this was previously a good fund, any new manager would have to be extremely stupid to change the recipe for success. Big funds from fund houses are not run by the seat of their pants."
