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Tuesday, 7 February, 2012 – Herald, The (Scotland)

Graham Campbell, Chief Executive of Scottish investment house, Saracen Fund Managers, has revealed his Global Income & Growth fund has outperformed the All-Share Index in its first full six months, and declared that equities offer “very good value”.

Meanwhile, he expressed hopes that additional inflows of investor money would increase the size of the Global Income & Growth fund from nearly £5 million to £10m by the end of this year, in what is a tough fundraising environment.  The fund is sold through wealth managers, such as Rathbone Brothers and Brewin Dolphin, to high net-worth individuals.

Declaring that “you have to buy when the market is out of favour”, Mr Campbell added: “Institutional holdings of equities are at historically low levels.  We think they are very good value.”   He said that the fund, launched on June 7, had made a negative total return of 1.5% in the six months to the end of December.  This was a better performance than the All-Share Index, which made a negative total return of about 3% in the same period.

Mr Campbell highlighted the fact that a large part of the portfolio was in big brand companies such as restaurant chain McDonald’s, household products companies Proctor & Gamble and Unilever, drinks giant Coca-Cola, and food groups Nestle, Kellogg’s and Heinz.

Highlighting such big-brand companies’ track record of delivering earnings and divident growth, and their relative resilience in tough economic conditions, he added: “These businesses – they are never the cheapest businesses in the market.  These are just value-creating companies.”

Mr Campbell, emphasising that the Global Income & Growth fund was almost fully invested in a 56-strong portfolio of companies, and had only about 2% of its assets in cash, said: “People give us money to invest.  We think the value is there.  We are not trying to time the market.”

He added: “I think it is the lowest-risk portfolio we have ever put together.  This is not a portfolio, we want to take risks on capital (with).  We are not investing in businessed that are very volatile, or are very leveraged.”

Mr Campbell highlighted drinks giant Diageo and Anheuser-Busch InBev, and Swedish engineering company, Atlas Copco, as stocks which had performed strongly within the Global Income & Growth fund.  He cited Tesco as a stock which had performed poorly, but he believes the UK supermarket giant will prove a good investment choice in the longer run.

Mr Campbell, who has overseen a move of the investment house’s headquarters from Glasgow to Edinburgh, said: “We always assumed they would lose market share in the UK.  We still think the growth story is intact.”

He also noted that Saracen Global Income & Growth held stock in cruise giant Carnival Corp, which suffered a tumble in its share price in the wake of the Costa Concordia disaster.

Jun, 11, 2011 12:01 AM – Herald, The (Scotland)

SCOTTISH investment boutique Saracen Fund Managers is making its first big expansion move since industry stalwart Graham Campbell bought into it – launching a global equity income vehicle which it believes will attract tens of millions of pounds.

The launch is the first by Saracen Fund Managers since Jim Fisher, the investment house’s founder and executive chairman, started the strongly-performing, UK-focused Saracen Growth Fund in 1999. The new fund is aimed at retail investors.

Mr Campbell, a former global head of retail funds at Scottish Widows Investment Partnership and a co-founder of Edinburgh Partners, bought a significant stake in the Saracen investment boutique in a deal revealed by The Herald last autumn. He and Mr Fisher highlighted their plans for expansion at that time, and Saracen has since moved its headquarters from Glasgow to Edinburgh.

The new, open-ended, Saracen Global Income and Growth Fund will be launched on Monday.

Asked about its likely size, Mr Campbell, who left Edinburgh Partners last year, said: “We would look, after 12 months, to be in tens of millions (of pounds)…It is an open-ended fund. It will be a slow burn, but this could potentially be a large fund.”

Mr Campbell emphasised he would be investing a “significant part” of his savings in the fund, aligning his interests with those of other investors, and that Saracen’s other fund managers and staff would also be putting in money.

This is in line with the philosophy adopted by Mr Fisher since the launch of Saracen Fund Managers in the late-1990s. Mr Fisher has a significant part of his personal wealth invested in Saracen Growth Fund.

Saracen Fund Managers is launching the new fund, which will be managed by Mr Campbell and former Bank of Scotland investment strategist Daniel Leaf, in response to “increased investor demand for income”.

Mr Campbell believes the vehicle, which will be marketed through private client stockbrokers and wealth managers, will have an advantage over UK equity income funds because its mandate to invest globally will enable a much more diversified portfolio. He pointed out that much of the yield in the UK equity market tended to be delivered by relatively few stocks, such as oil giant Royal Dutch Shell, British American Tobacco, and pharmaceuticals company AstraZeneca.

Explaining the rationale behind the launch of the new fund, Mr Campbell said: “It is quite clear that a variety of investors require income, and the yield on cash is negligible.”

Mr Campbell declared there was a “growing recognition” that there was a “bubble” in gilts. He noted the Bank of England’s pound(s)200bn boost to money supply had played a part in driving down the yield on five-year UK Government bonds to about 2%, and highlighted a belief that this was about half of what it should be given economic fundamentals.

He meanwhile predicted that the amount of commercial property assets owned by banks would put downward pressure on prices in this asset class.

Mr Campbell, highlighting Saracen’s decision to launch a global equities fund aimed at offering long-term total returns from both income and capital, claimed UK income funds were all “shooting in the same very small barrel”.

He added: “We find, by looking globally, we are able to invest in a very high-quality portfolio of industry leaders with strong balance sheets. We have a portfolio which is much more diversified than UK income funds.”

Mr Campbell voiced his belief that there was “a lot more value in companies that are based in the West but are able to drive their growth through expansion into emerging markets”.

He noted one-third of food company Heinz’s growth was coming from emerging markets. He added that more than 40% of household products group Unilever’s sales were in emerging markets.

Mr Campbell said the new fund would have a 0.75% per annum management charge, akin to that usually paid by big institutional as opposed to retail investors.

Mr Fisher and his colleague Craig Yeaman continue to run Saracen Growth. From launch in March 1999 to May 31 this year, the pound(s)46m Saracen Growth Fund has made a total return of 274.4%. This is well ahead of a total return of 62% on the FTSE All-Share Index over the same period.

Mr Campbell highlighted his belief that Saracen Growth Fund should be “much bigger”, given its “great track record.”

When you invest with Saracen, you can be confident that an identical analytical process takes place across all of our funds. We look for exactly the same characteristics when selecting companies and employ a common investment philosophy. Nevertheless, it should not come as a surprise that the portfolios of the two Saracen funds are quite different. Craig and Jim’s Growth Fund is an out-and-out UK equity growth fund which contains their thirty to forty best stock selections regardless of the size of company. The fund’s objective is capital growth. In contrast, Graham’s Global Income and Growth fund has a universe of global stocks and, outside of the UK, will concentrate on larger capitalised companies. The fund objective is total return based, with an important contribution expected to come from dividend income. For the UK component of the portfolio, we will exploit the analytical work undertaken for the Growth Fund.

As Head of Research, I aim to ensure that we maintain a consistency in stock selection across all our portfolios. Given the divergence in mandates, perhaps the biggest surprise is the commonality of holdings of UK Wealth Managers in both Saracen Funds. Rather than an anomaly, I will explain why these investments are attractive and can meet the objectives of both funds.

We were first attracted to UK Wealth Managers for a number of structural reasons resulting from the changing financial services landscape:

• The loss of faith by savers in traditional High Street banks to provide objective advice as well their inability to train qualified staff, will force investors to seek alternative providers.
• The impending Retail Distribution Review (RDR) is intended to improve the financial sector’s professional standards by introducing more stringent examination requirements and replacing commission based remuneration with a fee based system. The implementation of RDR is likely to see many smaller IFA’s leave the industry; the remaining IFA’s will no longer have incentives to recommend commission bearing products and are likely to outsource investment advice to wealth managers.
• The demise of final salary pension schemes will encourage individuals to take charge of their pension requirements. Discretionary fund managers are ideally placed to run SIPP’s.
• It is well documented that demographic trends will provide a boost for the UK’s savings market where an ageing population has to make provisions for retirement.

Having established these attractive industry trends, the next part of our process was to examine the valuation of the individual companies. We will only invest if strong fundamentals are not already discounted by share prices and the individual companies are of the requisite quality. In the case of wealth managers, these companies offer good value.

• As a group, they have strong balance sheets with healthy cash generation. This is reflected in high historic and growing dividend yields.
• The UK market is fragmented and we expect continued consolidation as smaller businesses and individual teams of managers are acquired by larger groups. The opportunities presented in the UK have already attracted overseas interest which we believe will persist.
• We believe the companies’ values stand at a discount to their net worth.
• Wealth managers’ profits are highly sensitive to gaining new businesses as well as movements in equity markets. Our base forecasts of 8% market returns augmented by 5% growth from acquisitions will equate to increased earnings in the high teens.

So, we have now assembled the investment case to invest in our favoured Wealth Managers. The attractions of structural growth allied with high, increasing dividends appeal to both the UK Growth and Global Income and Growth funds. If our analysis proves correct, the expected total return from these stocks should provide a positive contribution to both of our funds.

Story has revamped the branding of Saracen Fund Managers, creating the overarching proposition ‘Share Success’ which looks to highlight the importance of the partnership Saracen has with its wealth manager clientele and the performance of the fund to date.

The new branding in gold and teal features a triangle, representative of knowledge and strength, which replaces the ‘A’ in the company name ‘SARACEN’. The origins of the Saracen name are woven into the brand with the use of iconic, triangle-checked heraldry on the back of business cards, stationery and literature.

Saracen chief executive Graham Campbell said of the brand revamp: “The brand now needs revitalised to reflect today’s investment world, our investment values and philosophy in a clear, differentiated style that is aligned with the success of our top performing Fund. Story very quickly grasped what our team wanted to achieve and has efficiently developed a distinctive brand, as well as producing powerful marketing tools.”

And Story MD Sue Mullen added: “We wanted to maintain the original essence of the brand but make it more relevant and uplifting. The challenge was to be innovative in the brand’s look and feel yet maintain the gravitas required of a well-respected fund management company.”