T Bailey looks to established names

In its new Cautious Managed fund of funds, T Bailey is relying on tried and tested portfolios to generate returns, chosen on the basis of the three Ps: people, process and performance.

T Bailey, a Nottingham-based multi-manager boutique, launched its Cautious Managed fund on May 2, 2006. Its other two funds are the T Bailey Equity Income and T Bailey Growth portfolios. Richard Martin, chief executive officer and co-manager of the funds with Jason Britton, is pleased with the response to the company’s recent addition.

“Our head of sales has been pushing to launch it for some time,” he says. “The money is coming in and we are pleased with the response, especially considering the recent market turmoil, which makes people want to sit on their pens, rather than sign cheques with them.”

He says the turmoil has had mixed effects. “We started investing at the beginning of May, so we are holding a lot of cash,” he explains. “This gives us some fire-power to buy at lower prices.”

However, Martin says the group has remained cautious. “We have chosen quality managers – well-known names with solid performance who are not going to make too many mistakes,” he says.

The intention is for the fund to hold 25% in overseas investment, 25% in Britain, 25% in bonds, 15% in real estate and 10% other, including cash. In equities, it currently holds Framlington Equity Income and Standard Life High Income, managed by Karen Robertson. “Good, solid, no-nonsense names,” Martin says. “We also hold Schroder UK Alpha Plus, which has a big-cap bias, Old Mutual Mid Cap and Walker Cripps UK Growth. It is a solid UK portfolio, accounting for 22% of the fund’s assets.”

The fund’s overseas investments tend to be unconstrained. “We hold the Artemis Global Growth fund managed by Peter Saacke and the Neptune Global Equity fund managed by Robin Geffen,” Martin says. “They are very much benchmark averse.”

In bonds he holds another Artemis fund, Artemis High Income. “It is mostly UK corporate bonds,” Martin says. “On the property side, the fund currently holds Thames River Property Growth and Income. The rest is largely cash.”

There are 19 underlying funds in the portfolio, but when it is fully invested it will have 23-25. When deciding on funds in which to invest Martin says he looks at the three Ps: people, process and performance. “The people are the fund managers. We always meet them and get to know them over time,” he says. “The process is the investment process used by the manager. It has to be robust and repeatable and something we understand. We regard that as absolutely vital – there is a lot of bullshit thrown at you by fund managers. Lastly there is performance. We look for consistency in performance and performing in a way we would expect in appropriate markets.”

On average T Bailey holds funds for three years, but Martin says there are a lot he has held for five. In terms of region, he is strongly in favour of the Pacific Basin, Japan and emerging markets. “Emerging markets is still a long-term story, particularly the Far East,” Martin says.

With regard to cap size, the preference is for mid caps. “We have been strong believers in the FTSE 250,” he adds.

T Bailey is a private family office that started out managing family money. “We are not aiming to be a big investment house,” Martin says. “We approach it on the basis of satisfying demand as it is expressed to us.”