One-stop-shop with emerging bias

Richard Martin runs T Bailey Growth and favours emerging markets, which he says is a good defensive position. He is also bullish on Britain, but eschews the ’structurally flawed’ eurozone.

T Bailey suffered a blow in March when Jason Britton, the former chief investment officer and a portfolio manager, quit the firm after 12 years to take a break from financial services.

Losing a respected fund manager can have an immediate impact on a small firm. Old Broad Street Research removed T Bailey Growth from its funds rating service. Richard Martin, who ran the fund from 1999 to 2009, rejoined to oversee the management alongside Elliot Farley, the co-manager.

Martin says there were outflows, while this was more to do with fears over the global economy rather than the management of the fund.

Britton was known for his strong macro views, and Martin holds equally pronounced opinions. “The fund is intended to be a one-stop-shop for a mix of UK and global equities. (FoFs continues below)

“Jason had strong views on the [Japanese] yen, which he shorted, and also that the eurozone would collapse. I took the short off the yen because I think currency is hard to predict, particularly in the short term. We filled in the gap with Europe, but have reduced it substantially as events have unfolded,” he adds.

Another change implemented by Martin and Farley was the reduction in passive holdings, although he adds “there is still a place” for tracker funds.

Martin is cautious on the outlook for Europe, a stance which is reflected in the fund’s asset allocation. He says: “I have always felt that the eurozone concept is structurally flawed. If you look at the bunch of countries yoked together you realise how impossible the situation is.”

Martin is more optimistic about the British economy. Following last week’s autumn statement by George Osborne, the chancellor of the exchequer, Martin says the government is doing the right things in tackling the country’s debt, but that problems in Europe have jeopardised the British economic recovery.

Martin targets a specific type of manager for inclusion in the portfolio. The Liontrust Special Situations fund is a model, he says, for the type of management team he looks for.

”If you look at the bunch of countries yoked together you realise how impossible the situation is”

“Within the funds, we try to choose managers who have a clear bottom-up process and are not hugging indices,” he says. “The result is that most of our funds have very little exposure to banks.”

The managers are bullish on emerging markets. “We have been enthusiastic about emerging markets since the beginning of the fund in 1999. Our approach takes into account GDP growth, which took us to emerging markets,” he says.

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Two of Martin’s favoured emerging market funds are First State Global Emerging Market Leaders and Aberdeen Emerging Markets. However, he takes a particular interest in emerging market specialist boutiques such as the Somerset Capital Dividend Growth fund, a new addition to the portfolio.

“More funds are being launched in emerging markets which have a dividend focus, and this is proving to work well in this type of market,” he adds.