Wanted: older and wiser managers

Paul Kim, director of portfolio management at FundQuest, attributes some of Way Global Red Active’s success to its more mature managers. Yet his strategy for the year remains cautious.

There are times when grey hair is attractive. Times of economic crisis, for example. Paul Kim, the director of portfolio management (unit funds) at FundQuest, says: “At this time, we are looking for more experienced managers. Those managers with grey hair.”

The fund manager of FundQuest’s Way Global Red Active Portfolio fund looks for “pragmatic managers who can take advantage of the current situation and who can make the most out of it”.

In fact, Kim attributes the success of the £49.3m fund to a decent selection of funds managed by experienced managers. The Invesco Perpetual Income fund, for example, at 8.9% of the portfolio, is his biggest holding.

“Its manager, Neil Woodford, has been around for a long time,” Kim says, noting the portfolio benefits from experienced managers such as Woodford.

Kim says: “He [Woodford] has not had any banks in his portfolio for a long time. And he has been talking about a possible economic crisis for a long time. He has been saying that too much credit is around and that it has to be paid back at one point.”

Woodford started calling banks “uninvestable” years ago, adds Kim.

Therefore, Kim heavily increased the percentage of the Invesco Perpetual Income fund and it is possible he will build it up further.

The world’s economy has not hit the bottom yet, he says. “I think there is a lot of bad news around. It could still get worse and I do not expect a quick recovery.” Therefore, he remains cautious.

His strategy was already cautious last year and in 2007. “In 2007 we underperformed because our strategy was cautious, but last year we were getting better returns.”
Kim adds: “Unlike others, we did not jump on the bandwagon of commodities. They saw a huge growth in China and general growth. But now the world economy has slowed down and people realise the demand for commodities is not going to be that high anymore.”

For 2009, Kim is hoping to “gain something”. However, he admits, given the market conditions, the strategy is likely
to focus on “losing as little as possible”.

He adds: “Although it is likely that there will be some changes later in the year, at the present time we are very happy with our holdings. We have no plans to make any big changes.”

However, he seeks to reduce his sterling-exposed holdings. Kim says he still has several holdings in dollar, which he is happy to keep.

“At the moment, the dollar is a safer currency than sterling. Although, in the long term, the dollar is likely to decline.”

He says the euro was a good currency last year, but it is likely to depreciate this year because of the economic problems of many eurozone countries. The euro could
suffer, Kim says, because governments of countries within the eurozone were not as quick to pass economic stimulus packages. And the measures passed were not heavy enough.

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