Meet the management

Sandy Fleming F & C smaller companies fund manager has bear market experience

By Julian Knight BBC News Online personal finance reporter

Fund managers hold the key to many of our savings and investments. But after two years of falling stock markets, all but a few have racked up losses.

BBC News Online decided to follow a manager for a day to see if they really offer more than DIY investing.

As I entered the wood panelled offices of the City's oldest fund management firm, F&C, there was no screaming into telephones, few frowns and not a pair of red braces in sight.

There were no brokers with their heads in their hands contemplating disappearing bonus cheques.

Instead, the only noise was the tip-tap of fingers on keyboards.

Little gave away the fact that F&C is a firm that has invested millions of clients' cash for more than a century.

It probably helped the calm that - for once - it was a quiet day on the market, at least until Wall Street opened.

Trading was light and the FTSE bobbed around break-even point for most of the day.

Shadow

The manager I was shadowing was Sandy Fleming, who runs the F&C smaller companies fund.

Good managers matter more than any other aspect of business.

Sandy Fleming

His fund is a City institution - it was founded in 1889 - and is worth £200m, with holdings in 285 companies across the globe.

Unlike many in the City, Mr Fleming has experience of a bear market.

He was just starting out on his fund management career during the falling markets of the early 1970s.

He recalled how in 1974 during the three-day week, he had to read company reports in daylight hours owing to power cuts, while markets tumbled daily.

Don't panic

Unfortunately, after initially bucking the bear market, the value of shares in the fund have marched to the stock market's funereal beat.

The share price stood at 132p on 10 October compared with 191.5p a year before.

Despite this, during the morning meeting of the fund management team there was no air of panic.

Overnight news was discussed and fund managers talked about how it affected their holdings and prospects.

Instead of being pre-occupied with accounting scandals or Iraq, managers seemed more interested in business minutiae.

All quiet on the trading floor

A slowdown in the US car market was noted and as a result it was decided that the Japanese car component industry was not the place to be invested.

In addition, it was decided that troubles in the financial services sector would spell problems for firms selling banking software.

Market torpor

Prior to lunch, at a meeting of Mr Fleming's global team, broader subjects were covered, the decade long torpor of the Japanese stock market included.

"There are many companies in the Nikkei which are quasi-bankrupt," Peter Ewins, Mr Fleming's UK number two, concluded.

"The market says that they are worthless, but they keep on trading nevertheless."

Until the dead wood is removed, it is difficult to see a way out for Japan, he said.

Technology - once an investor's Holy Grail - was dismissed by the fund's Far East smaller company specialist.

"We predict poor performance in this sector for the next 10 years. Put simply, technology is manufacturing where capital equipment has to be replaced every two years," he said.

Visits

After lunch Mr Fleming and the team got back to basics - as the UK managers reported on the results of their company visits.

The special access granted to fund managers by companies is a key justification for fees paid by investors.

Mr Fleming is unequivocal as to its importance: "We never buy a company until we meet the team at the top. Good managers matter more than any other aspect of business."

Practising what they preached, the management team had dispersed to all corners of the UK.

One manager, Catherine Stanley, had spent the previous day visiting a chemical firm in north-west England.

Another had been keeping tabs on a US pharmaceutical firm that was slipping even further behind schedule for a product launch.

Mr Fleming had been scouting the branches of a retailer the fund was interested in investing in.

Mood swing

"Long term", "fair value" and "sound company fundamentals" were phrases bandied about like confetti during the meeting.

However, the dark market clouds couldn't be kept at bay.

Mr Fleming announced that New York had opened 1.5% lower, wiping out all the gains of the previous day's rally.

"You can't legislate for this level of volatility - it's nearly all bad news, the market is crazy," he said.

It seems even the experts are suffering the investor blues.