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EDITOR’S BLOG: People who run money make money

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14/03/2007

I was walking across Old Broad Street in the City the other evening, right under the Level 42 building, or what my generation of Londoners affectionately called (and some still do) the Natwest Tower, when I nearly met my maker.

The end for me seemed to be coming in the shape of a red Ferrari that was probably doing 50mph in a narrow, congested city street with a strict speed limit of 30mph. Oh well, better than being flattened by a number 45 bus in Chelmsford (where I live) I thought.

Fortunately for this blog, the driver saw me in time and performed an emergency stop, much to the amusement of the pedestrians thronging the pavement and the relief of myself, who wants to see if a British club can win the European Cup in May this year.

And what about the driver? He was young, only in his mid-20s I’d say, attired in a suit that probably cost the equivalent of my outstanding mortgage and was bedecked with more gold chains and rings than you’ll find in a Bond Street jeweller’s shop. “Sorry about that, mate,” he hollered as he sped off up the road.

Well, it was good of him to apologise really and such people are not that rare in the concrete canyons of the London EC postcodes. I don’t know what that car cost him. Whatever it was, though, he wouldn’t have been a filing clerk for a bank or an insurance company to afford such a flashy motor.

Once I had become reconciled to still being alive, I settled on my almost-assassin being a fund manager, one of those people who “run” money for a living and get a very good one in return for doing it.

Now some people say fund managers are overrated and never sustain good performance for any length of time – simply because it is impossible to beat the market all the time. That’s a vast generalisation, of course, and someone like Anthony Bolton, who ran the Fidelity Special Situations Fund, beat the market over the 28 years or so that he ran the fund.

Anyway, if you are interested in these people (and if you invest in funds you should be) and their investment records, the place for you is citywire.com, which has just published a list of the top 100 fund managers, drawn from a pool of 550 surveyed, and based on their past performance.

Through a fairly complex process, Citywire has calculated a ‘manager ratio’, where the higher the ratio achieved by the manager the better they are at their job.

Topping the list with a ratio of 2.34 is Daniel Nickols, 37, who manages Old Mutual Select Smaller Companies, a fund that concentrates on the bottom 10% of the UK stock market by market capitalisation (basically how much the company is worth).

Right, you may think, Mr Nickols must be a numerical genius who majored in pure maths (the stuff with a lot of x’s and y’s in it) at Cambridge and who would have been a rocket scientist if the money had been better.

Not a bit of it. He has a degree in modern and medieval languages and a failed career as a chartered accountant behind him. Is this a bar to confidence? Would you trust your money with this man? “Yes, because it doesn’t really matter what their background is as long as someone can do the job consistently well,” replies a senior City analyst.

“A lot of people say don’t touch actively managed funds with a bargepole and just go with a tracker fund that follows an index. That’s fine but pretty cautious. A resource like Citywire will allow you to find the managers who add value, so why not spend an hour or so analysing the information there? It could be well worthwhile.”

Worthwhile indeed. And listen – the chap who nearly flattened me on the road may not have been a fund manager at all. He may have been a foreign exchange dealer… or a bond trader… or a complete merchant banker.

 

 

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