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Fantasy fund of funds: Citywire staff return to the market

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Day in, day out, we talk to fund managers and professional investors. As a team we're at the crosshair of the funds industry. Now we are crossing that divide into the world of fund of funds management to pit our selection skills against one another.

Following a previous, somewhat regrettable attempt back in 2011, our team, featuring three new faces, returns to the market to pick the fund managers we are putting our imaginary money behind to outperform in 2013.

Onto the rather crude methodology - us hacks like to keep it simple. We have selected one manager each from four regional equity sectors: Global equity, European equity, Emerging markets and North American equity. These funds will then be compared against the most commonly held benchmark in each respective market with returns all calculated in dollars.

We will report on the status of our imaginary assets on a quarterly basis. So who has the news desk put their faith in for the year ahead?

Click on the names of the funds below to see their three-year performance figures

Journalist Global equity European equity Emerging markets equity North American equity
Emily Blewett UniFavorit: Aktien Concentra M&G Global Emerging Markets Dynamic Power American Growth
Matt Goodburn Vontobel Funds Global Value Eq BGF Continental European Flexible First State Global Emerging Market Leaders Vanguard US Discoveries
Atholl Simpson HMG Globetrotter Agressor WMP EMA Established Leaders Fund Dynamic Power American Growth
Chris Sloley MFS Meridian Funds Global Concentrated BNP Paribas L1 Equity Best Sel Europe Polar Capital Emerging Mkt Income Vontobel Fund US Value Eq
Amy Williams Pictet-Security OYSTER European Opportunities Reyl (Lux) GF-Emerging Markets Equities TRP Funds SICAV - US Smaller Companies

The thinking behind our fund picks

Emily Blewett, Reporter

Global equity: UniFavorit: Aktien (Frank Thormann)

With global equities you want maximum diversity. This fund, with its largest positions at around two per cent has this. I think it's going to be a telling year for equity markets as bonds begin to fall out of favour with investors. I'm therefore happy to go with a fund that it able to add risk and not be bound by sector restrictions.

European equity: Concentra (Matthias Born)

I think German equities will continue to have a good run this year (albeit with initial set-backs) so I'm happy picking an outperforming manager who knows that market well. The worry is that the fund may be a bit too defensively positioned if we do see further gains across broader European equity markets.

Emerging market equity: M&G Global Emerging Markets (Matthew Vaight)

This fund has has some considerable outperformance. Invested in well-known names, this cautious approach makes me think that this fund could be a steady pick for the coming year.

North American equity: Dynamic Power American Growth (Noah Blackstein)

Noah Blackstein manages much larger non-Ucits funds, but this Ucits mirror I think, is less well known among fund selectors - a diamond in the rough.

Blackstein knows the market well and, as his top picks show, he is not afraid to apply bottom-up investment ideas to his selection. The US faces macro headwinds this year - the major worry, even with this fund, is that another debt ceiling-like stalemate could bite a chunk out of performance this year.

Matt Goodburn, Investment Editor

European equity: BGF Continental European Flexible (Alister Hibbert)

I have chosen this fund as Alister Hibbert is one of the most lucid and high conviction managers I have interviewed. Europe is still quite early in its economic cycle and in recovery mode so I have picked quite a punchy manager who can make the most of any rally through his focus on quality stocks, many of which have a strong emerging market focus.

Emerging market equity: First State Global Emerging Market Leaders (Jonathan Asante/Glen Finegan)

If you are picking a global emerging markets asset allocator you want one of the best, and a team that is well versed in picking the most well-run and transparent companies as befits the pedigree of its investment house. Jon Asante and Glen Finegan are two of the best, and if we have a year of modest emerging market growth with the odd setback along the way, I expect them to outperform most of their peers.

North American equity: Vanguard US Discoveries (Jane M White/Gary C Hutton/Robert F Granahan/John J Granahan)

I will be honest. I am a relative newcomer to the offshore fund space so less familiar with many of the best investment houses outside the UK. But by crunching a few numbers, I can see that this team is consistently near the top over most time frames. I am keen to pick a team with a disciplined process, and who have specialists who focus on different parts of the market cycle in what could be a tricky year for US equities after such a strong run.

Global equity: Vontobel Funds Global Value Eq (Rajiv Jain)

See my entry for Vanguard! Again I have reverted to picking from a house I have heard good things about and with one of the best long term track records across various markets. Vontobel ticks this box, and in Rajiv Jain, I have chosen a manager with a value tilt, who I expect to capitalise if we see a correction in global equities at some point this year.

Atholl Simpson, Deputy Editor

Global equity: HMG Globetrotter (Marc Girault/Paul Girault)

One of the riskier bets within my fund of funds portfolio is the global equity fund of French boutique managers Marc and Paul Girault. Their Globetrotter fund has a strong bias towards companies that generate the majority of their revenue in the emerging markets. The pair’s high conviction value approach leads them to have a keen interest in frontier markets, however, they temper their allocation with investments in large European companies’ foreign affiliates.

The pair’s strategy has been paying off, placing their fund second in the five-year top-performing global equity managers ranking and earning them a Citywire A rating in the process.

European equity: Agressor (Damien Lanternier)

Another French boutique manager to be included in my portfolio is Damien Lanternier. He was recently named one of the five best European equity managers in our Citywire 1000 publication and also holds a Euro Stars A rating.

Aside from his Citywire ratings, Lanternier is a manager I have been following for some time and I believe his openly contrarian approach to investing will pay off in 2013. European equity is seeing a revival in interest across the board this year and I believe his contrarian and ‘carte blanche’ style of investing will allow him to pick the stocks that are not yet on investors’ radars.

North American equity: Dynamic Power American Growth (Noah Blackstein)

The second Euro Stars rated manager to feature in my top pick is Noah Blackstein of Canadian group Dundee Wealth, who seemingly came out of nowhere in 2012 and dominated many US equity top performing manager rankings.

I believe his high conviction approach to the tech sector could see him continue his strong run. He avoids big names like Google and Apple, considering the latter’s 10% share dive recently that could prove a shrewd move. Instead he prefers to focus on lesser known names tapping the the cloud computing theme, one I believe will continue to develop and gain traction.

Emerging Markets: WMP EMA Established Leaders Fund (Balthasar Meier)

Swiss boutique founder Balthasar Meier is the only manager in my list who does not have a rating. However, Meier is a former holder of a Citywire AA rating and unless any dramatic macro event befalls his sector then he could be in line to regain his rating in the coming months.

Over the past two years, he has beaten the likes of emerging market stars Jonathan Asante of First State, Vontobel’s Rajiv Jain and Aberdeen’s Devan Kaloo in terms of his returns. With only €30 million in assets, it is the smallest fund among my top picks and its size gives Meier flexibility that other big time managers do not have.

His strong conviction on India, which makes up 22% of the fund, will prove decisive in the coming year for my chances of topping the Citywire Global leader board.

Chris Sloley, Reporter

Global equity: MFS Meridian Funds Global Concentrated (Roger Morley/David Mannheim)

Despite being described as a ‘wuss’ by one member of our team for the decision to back, on the whole, Citywire-rated managers, I am trusting long-term outperformance to transfer to shorter term gains as well.

First and foremost I have gone for a ‘safe pair of hands’, with five time Euro Stars AAA-rated manager Roger Morley and co-manager David Mannheim (Euro Stars A-rated) on the $186 million, 25-stock fund. My logic is that the fund, which has an overweight to consumer staples, will capitalise indirectly from resurgence in the emerging markets.

North American equity: Vontobel Fund US Value Eq (Ed Walczak/Matthew Benkendorf)

Another co-managed fund and a bit left-field given one of the managers formerly featured in our own Performance Clinic feature following a difficult 2008/09. However, Ed Walczak – alongside Euro Stars AA-rated Matthew Benkendorf – has shown vast improvement since then with their blue chip-fettered, defensively-minded approach.

Emerging markets equity: Polar Capital Emerging Mkt Income Fund (William Calvert)

Another of the rated managers in my pretend portfolio is Polar Capital’s William Calvert. The former EM chief at AXA has posted a strong, consistent performance in the emerging market equity space and I am backing him to transform this into shorter term outperformance as well. This is also a play on the sizeable increase in EM dividend paying companies.

European equity: BNP Paribas L1 Equity Best Sel Europe IC (Valérie Charriere-Pousse)

Representing the European equity aspect of my theoretical fund of funds is BNP Paribas’ Euro Stars AA-rated manager Valérie Charriere-Pousse. Previously picked out as a Manager to Watch, Charriere-Pousse has progressed into the ratings off the back of her strong conviction style and emphasis on ‘market leaders’.

Amy Williams, Editor

US equity: TRP Funds SICAV- US Smaller Companies Equity fund (David Wagner)

Efficient markets like the US are tough to beat which is why I’ve decided to head down the capitalisation spectrum. T. Rowe Price is known for its detailed company analysis and the manager of this small cap fund can tap into its sizeable research unit to generate new ideas.

With over 200 holdings the fund is also widely diversified, so is able to withstand any potential fiscal cliff wobbles, while at the same time eeking out alpha through small bets on turnaround story stocks.

European equity: OYSTER European Opportunities fund (Eric Bendahan)

Mean reversion serves as the basis for this pick. After some relative underperformance the Banque Syz manager and renowned stockpicker has regained his form with an astute reading of the Draghi factor. A well-timed rotation out of expensive quality names into high growth companies after ECB’s chairman’s market-moving comments has provided this portfolio with a boost. The effects of which I think will linger on this year.

Global equity: Pictet Security (Yves Kramer and Frédéric Dupraz)

This fund supplies the large cap exposure that is lacking in my US equity pick. It also taps a theme that is growing in importance with every technological innovation; security. From cars to data protection, companies are going to think twice before cutting this cost. It’s an industry that is growing globally and fairly immune from macro concerns.

Emerging markets equity: Reyl (Lux) GF-Emerging Markets Equities fund (Thomas de Saint-Seine, Emmanuel Hauptmann and Maxime Botti)

I like the blend approach of this fund which sees 60% of positions taken on a valuation criteria, 20% growth-based and 20% income-orientated. This three-way alpha split added with the fact that the trio employ a growth strategy with a momentum bias means they should be well positioned to catch any upswings in emerging markets this year.

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