Distinguishing himself as one of the first breed of graduates entering the City to have actually understood how a spreadsheet worked, Marcus Brookes, head of multi-manager at Cazenove Capital Management, has grassroots experience of how investment management has evolved over the last decade and a half.
"Stock market charts were being done by hand on graph paper with a ruler and different coloured pencils. At the time, we had some very clever investment managers, who knew everything there was to know about stocks, but did not know you could put a discounted cash model on a spreadsheet. So I did that for them, along with basic performance analysis and risk analysis, working across the different equity markets."
Starting right at the bottom, and witnessing first hand how people think about stocks from both a valuation perspective and a macro outlook, gave Mr Brookes the grounding he needed to engage with fund managers and enter the multi-manager arena just as it began to pick up speed in the mid-1990s.
Unlike a traditional fund, in which a single fund manager controls all of the money and investments in a fund, a multi-manager portfolio spreads investors' money across different asset types and fund managers. Mr Brookes is clear on why he believes the fund of funds model works. "Making decisions about how much you should invest, when and for how long, whether you should be in American equities, or should be thinking about China, are all incredibly complex questions, which I do not think the average person can make decisions on, over a couple of hours on a Sunday having read the Investors Chronicle and a couple of other publications," he says.
In January 2008, Mr Brookes took over the reigns of the Cazenove Multi-Manager Diversity Fund (), a multi-asset fund of funds, which he and Robin McDonald co-manage along with four other multi-manager funds: Balanced, Tactical, UK Growth and Global ex UK.
At the time, the Diversity Fund was £85m in size, but has since grown to almost £330m in size, making it the biggest fund in Cazenove's multi-manager range. Mr Brookes attributes the fund's rapid growth to both the rising popularity of the cautious managed sector and the fund's unique investment proposition. "The fund sits firmly within the cautious managed sector, but is not another 'me too' standard balanced mandate. We incorporate alternative investments - the area many advisers and investors often feel most uncomfortable with managing themselves - and thanks to the fund's unique structure it can hold a high percentage in cash," he says.
The fund's asset allocation, which is one-third fixed interest and cash, one-third equities and one-third alternatives, is structured to deliver smooth returns with a target of inflation plus 4 per cent. So far, the structure has worked: up until September 2008, the fund had not lost a single dime thanks to a large cash weighting and a focus on fund managers underweight in banks and commodities. While things got less rosy following the collapse of Lehmans, the fund still managed to significantly outperform the sector. This year, the fund is up close to 15 per cent to date.
| MARCUS BROOKES CV |
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Marcus Brookes joined Cazenove in January 2008. He is head of multi-manager and co-manager of Cazenove's multi-manager range of funds. Prior to Cazenove, Mr Brookes was a fund manager at Gartmore, responsible for the Gartmore multi-manager range of funds. Prior to Gartmore, he held a similar position at Insight Investment. Mr Brookes graduated from the University of Stirling with an MSc. |
Asset allocation, then manager
Mr Brooke's investment process dictates that he first decides the asset allocation, then finds the manager to match, choosing a fund manager for the relevant market conditions. For now, his macro views are very much defensive. He says: "While we recognise that markets can still very well go up because there is so much money sloshing around, thanks to quantitative easing, the printing of more money has a multitude of impacts, many of which we don't even understand yet, as it's never been done to this degree before. So I think a cautious stance is probably right - we don't want to go too gung-ho with any of our investments and are choosing to stick with the more defensive managers."
In the fixed interest arena, Mr Brookes favours the M&G Optimal Income Fund, managed by Richard Woolnough. He rates this manager for his ability to read the market, and his macro understanding, saying that the M&G Optimal Income Fund is the most flexible fund of its nature. "It can be in sovereign bonds, high yield and investment grade. It can make use of credit default swaps, asset-backed securities and even short gilt futures. And in a year where equities have rallied incredibly strongly, the fund is up close to 30 per cent year to date beating the FTSE 100," he comments.
But he also includes a slightly more plain vanilla fund, the Invesco Perpetual Corporate Bond Fund, in his holdings, saying that the fund has done a very good job picking up on the theme of financial bonds being completely oversold. While there are other funds that have done better this year, Mr Brookes believes this is a solid buy.
In the equity world, Mr Brookes shares the consensual view that Asian Emerging Markets will exhibit the strongest growth rates, but urges investors to cast their eye towards Japan. "Japan is off everyone's radar as the focus continues to fall on China and the emerging markets, and I think Japan can be one of those surprise areas given that everybody loves to hate it. The yen tends to do well when markets are down, it is a mature economy and China is right on the doorstep." In this space he favours the GLG Japan CoreAlpha fund, formerly known as the SocGen Japan Core Alpha Fund, lauding the skills of the manager, Stephen Harker.
As for UK equities, Mr Brookes is sticking with Neil Woodford, who, after a strong 2008, has been left behind this year as commodities and financials took off. But Mr Brookes is convinced that Mr Woodford's portfolio will come good. "I think his portfolio looks the cheapest I have seen for a very long time, and he is investing in really top quality companies with good earnings and very little leverage. It's a brave statement to make, but if there is a problem in the equity market, Neil Woodford's portfolio might not even go down."
Despite Mr Brookes's cautious macro stance, and his preference for more defensively positioned managers, he is spoilt for choice when it comes to picking a fund manager to match his fund's asset allocation and macro overlay, but then choice is not the concern here. As he points out: "Choice is not my biggest issue - I have got 5,000 funds which I can choose from - it's actually making sure I get the right quality."
