By Ian Cowie

The Sunday Times
Sunday 22 September 2013

Buying stocks directly can save you management fees but some funds are worth shelling out for

Sheer size is no guarantee of stability in volatile stock markets, as many highly paid professional fund managers discovered when blue chips provided little protection against capital destruction in the credit crunch. More than one in six members of the FTSE100 index of Britain's biggest shares lost more than half their value, peak to trough during the past five years.

The construction, banking and mining sectors saw giants cut off at the knees. Some have bounced back strongly, including building-related stocks such as Travis Perkins and Wolseley. But the pain continues for other members of the FTSE 50% Fallers Hall of Shame. Investors in Rio Tinto, Eurasian Natural Resources and RBS have suffered a dismal five years without, as yet, a happy ending.

This matters for millions of ordinary savers in company pensions where asset allocation follows the blue-chip index closely. Just as jobsworths used to say "nobody ever got fired for buying IBM" many trustees and fund managers find it easier to run what are in effect index trackers, although many charge or pay active fund management fees for doing so. ......

...... So, over the past five years, which stock pickers proved best at shunning the FTSE 50% Fallers Hall of Shame? ......

...... Steve Forbes, managing director of Alan Steel Asset Management pointed out: "Francis Brooke at Trojan Income puts a premium on capital preservation and had not exposure to banks or miners. For non income investors, Hugh Sergeant at River and Mercantile UK High Alpha and Ed Leggett at Standard Life UK Equity Unconstrained are shining examples of managers who have completely free rein about where they invest.

"Interestingly a total of 341 companies have been in the FTSE 100 index since it was launched in 1984, with many dropping in and out. Tracker funds are forces to sell these shares when they are low and buy them again when they recover which goes against all investment principles." ......

Quote courtesy of The Sunday Times
Sunday 22 September 2013