by Matt GoodburnCartesian Capital Partners hashired Jeremy Hall to work acrossthe Edinburgh boutique’s rangeof hedge and open-ended fundvehicles to give the expandinggroup its third fund manager.

Hall will join Andrew Kellyand David Stevenson as aninvestment partner on 1 Augustfrom Teather & Greenwood’sEdinburgh office, where he hasbeen working as a stockbroker.

Citywire sources indicate thatthe boutique is also close tofinalising a new multi-managercontract, which is likely to give itat least a further £150 million ofnew assets under management.

Hall has seven years ofEuropean equities investmentexperience, including stints atScottish Life and Abbey National.

He subsequently switched to

the UK equities desk afterjoining SVM where he workedalongside Kelly and fellowpartner David Stevenson beforethey resigned to set up Cartesianin December 2005.

Kelly says Hall will workacross all of the group’s productsand will be involved with themanagement of the two 130/30funds the boutique is expectingto launch later inthe year.

Cartesian isenjoying a rapidexpansion in itsassets undermanagement since itlaunched its UKOpportunities fundin January 2006 with£20 million seedingmoney from jointventure partner

Resolution Asset Management.The fund has now grown to

£106 million with Kelly sayingthe fund has seen inflows ofnearly £40 million since the startof 2006.

Kelly said: ‘Jeremy will workclosely with David and myselfand will hit the ground runningin August. The hire issymptomatic of our success

because we are growingvery rapidly.

‘At the turn of theyear the UKOpportunities fundstood at around £70million but we hadmajor inflows from twokey investors.’

Resolution andCartesian declined tocomment on thepotential new contracts.

www.citywire.co.uk 19 April 2007

by Alan O’SullivanNew Star’s Theo Zemek is looking into thepossibility of investing into forestry as an asset class.

The Citywire AAA-rated manager of the £491million New Star Managed Distribution and £1.03billion Fixed Interest funds believes that forestrycould be the ‘new bonds’ and recently travelled tothe University of Yale, where she did her under-graduate degree, to look into investment possibili-ties within the industry.

The asset class is increasingly emerging as aprofitable portfolio diversifier. The InternationalProperty Databank Forestry Index 2006 shows theaverage total return on investments in forestry in2005 was 14.4%, the highest annual return since

the index began in 1992.When asked if New Star would consider

launching a forestry fund in the future, Zemeksaid the company’s founder, John Duffield, maytake some convincing: ‘I don’t know whether Johnwould go for that or not. He went for it enough topay for me to go on the course.’

Yale runs short courses in global forestrytrends for executives keen to learn more aboutthe asset class. The intensive five-day courses, thelatest of which took place at the end of March,cost $7,500 (£3,700).

Fund managers interested in investigating thisopportunity can take consolation in the fact thatall course materials are included.

Fidelity torefocus European mid-cap fundFidelity is rebranding its Europeanmid-cap fund at the beginning ofJuly to better reflect its manager’sinvestment mandate, writes AlanO’Sullivan.

The €481 million (£325 million)Luxembourg-domiciled SicavFidelity European Mid Cap fund,managed by Trygve Toraasen, ispredominantly invested in mid-capstocks with a market capitalisationof approximately €1-10 billion.

However, Citywire has learnedthat the fund will be renamed theEuropean Dynamic Growth fund inJuly to reflect the fact that itsstocks are gradually increasing insize and moving into the large-cap arena.

Toraasen will have more latitudeto move into large-cap stocks topreserve capital and aid returns asa result of the rebrand. The fund’sbenchmark will also change fromthe DJ Stoxx Mid Cap index to theMSCI Europe index.

Mid-cap stocks have enjoyedrelative outperformance over thepast three years, buoyed by a highlevel of corporate activity andstrong earnings growth. However,valuations have periodically fallento unattractive levels relative tothe FTSE 100 over the past year.

The fund has underperformedits current index over one andthree years since its launch inSeptember 2001. Over the pastyear it has returned 15.5% to theindex’s 21%.

Fidelity declined to comment.

Happy Hunting for A-rated Thomas – p3 Bedlam’s Global offering fails to impress – p4

Managers uncover Europe’s hidden value – p6

Two becomes three at Cartesian

Winners of theIMA Team Awardfor Excellence in

Investment Writing2005 and 2006

First for fund manager performance, news and analysisFirst for fund manager performance, news and analysisNº 163

Zemek hopes Duffield can see the wood for the treesFrontRunnerFrontRunner

Kelly: major inflows since 2006

*Source: Lipper, mid to mid basis, net of fees, for period 31/03/04 to 31/03/07.Richard Dunbar is AA-rated by Citywire based on his risk adjusted performance for the period 29/02/04 to 28/02/07. Source and copyright Citywire Financial Publishers Ltd.For professional advisers only. Past performance is not a guide to future performance.

We can see investment potential where others can't.

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SWIP UK Income Fund.73.7%

by Dylan LoboMid-cap firm Hunting hasreplaced Tate & Lyle as thebiggest holding in Citywire A-rated Nigel Thomas’ AXAFramlington UK SelectOpportunities fund.

Hunting, which offer arange of oil and gas servicesworldwide, accounts for 3.5%of the fund. Thomas’confidence in the stock hasbeen reinforced by his recentvisit to one of Hunting’s oilproduction sites in Canada.

He said: ‘Production fromthere should increasefrom a million barrels aday to two million by theend of the decade andby 2020 they arelooking forinvestment toproduce fivemillion barrels ofoil a day.’

Sugar producerTate & Lyle, which

was the fund’s top holding inthe third and fourth quartershas fallen out of the top 10after it issued a shock profitswarning in January. The alertwiped out all of Thomas’profits on Tate, which nowaccounts for 2.2% of theportfolio.

However, Thomas said hewill continue to keep faithwith Tate & Lyle at least untilit reports its figures for Marchnext month, to determinewhether there are supplyproblems at the firm. Despite

these concerns, he remainsgenerally upbeat on Tateand expects its forays into

alternative energy tohelp drive itsperformance.

The fund’ssecond and thirdbiggest holdingsare utility giant

National Grid andInternational Power

at 3.3% and 3.1% respective-ly. ‘This is a sign of mycautious nature in terms ofthe market being buoyed byprivate equity and break-upvaluations. These firms havedistinct attractions and arestill attractive even at theircurrent valuations.’

Thomas also remains veryoverweight on industrialsupport services where he hasaround 33% versus the 7.5%in the All-Share benchmark.

He said: ‘I still likeindustrial support services.The areas in the world wherewe are seeing a great deal ofinvestment is in powergeneration, oil and gas,energy, nuclear, mining,defence, aerospace andtransport infrastructure.’

Over the last three years theAXA Framlington UK SelectOpportunities fund hasreturned 71.8% versus a peergroup average of 59.5%.

NEWS

Happy Hunting for A-rated Thomas

by Matt GoodburnArtemis UK Special Situationsmanager Derek Stuart has beenreducing his stake in Scottishtrain and bus operatorFirstGroup after the groupfailed to make the shortlist ofbidders for the new GreaterAnglia rail franchise.

Citywire sources indicate thatStuart owned around 4.5million shares in the group atthe end of January 2007,equating to about 1.2% ofFirstGroup, before the stakewas increased by 500,000 toalmost five million shares inmid-February.

When the news broke thatFirstGroup would not be

considered for the renewedfranchise for Greater EastAnglia, part of which it iscurrently running, Citywiresources reveal that Stuartreacted to the news by makingtwo significant transactions onthe stock on the same day.

Stuart sold around 1.8million shares in the company,netting him nearly £12.5million to leave his stake at justover three million shares.

FirstGroup shares weretrading at 683p on 2 Aprilbefore hitting a year-high of694p the day after Stuart soldthe shares.

However, his profit-takingwas well timed as the shares

have since fallen back toaround 664p on 17 April.

Other fund managementgroups who will be watchingFirstGroup’s continuedperformance closely includeM&G Investment Management.

Citywire sources indicatethat M&G held 5.61% ofFirstGroup’s issued equity atthe end of January 2007, whileMorley Fund Managementheld over 14 million sharesequating to 3.5% ofFirstGroup.

Stuart may be looking to selldown his stake further, aspolitical forces move closertowards a deal to privatise theScottish rail network.

Stuart’s FirstGroup holding hits the buffers

www.citywire.co.uk 3 19 April 2007

Performance Highlights

Neptune pullslaunch of new fundsNeptune Investment Managementhas decided not to launch two fundswhich it has registered with the FSA,writes Charlie Parker.

The group secretly registered theNeptune Asia-Pacific Opportunitiesand Neptune Latin America funds inrecent months.

Robin Geffen, managing directorand founder of Neptune, said that hehas now decided the market is notright for either of the funds.

Geffen told Citywire: ‘These fundregistrations will most likely nowexpire worthless.

‘Our investment outlook on LatinAmerica has now become verynegative.’

Geffen said the group hasconsidered launching the funds withthree other mandates that werelaunched in January.

Geffen said the Asia-Pacific fundwas seriously considered because anumber of managers were in themarket for jobs, but Geffen no longerhas any targets in mind to fill this gapin the firm’s range.

The firm has enjoyed a strong ISAseason, particularly selling theNeptune Russia & Greater Russiafund after Hargreaves Lansdownpicked the fund as its adventurousbet for an ISA.

Hargreaves Lansdown has said thefund was in its top five in sales termsalongside dominant propositionssuch as Neil Woodford’s InvescoPerpetual income funds.

Performance Highlights

NOT A LOT OF PEOPLE KNOW THAT...Every trade publication works hardto make sure it targets the rightreaders. But which of ourdownmarket rivals might have gottoo big for its boots by deciding thatMark Dampier, head of research atHargreaves Lansdown, no longerdeserves a free subscription? Abold move to be sure, almost asbold as another one of our rivalswho recently decided that DariusMcDermott from Chelsea no longerdeserved a free subscription either.You’re both welcome here atCitywire.

Thomas: Hunting bargains

SMITH ON FUNDS

19 April 2007 4 www.citywire.co.uk

They do things differently at Bedlam so perhapsthe investment world should not be toosurprised to hear the group plans to launch aGlobal Growth investment trust at a time whenthe Global Growth sector as a whole carries anaverage 9% discount. Or that the new trust willissue loyalty shares to initial investors stillinvested in the trust in November 2008 andrevive the issue of ‘free’ warrants to sharehold-ers (both on a one-for-ten basis).

The new Cherry Picker trust, to be managedjointly by Bedlam’s chief executive officerJonathan Compton and its chief investmentofficer Ian McCallum, will hold 25-30 positionsbased on the company’s bottom-up, valuescreen. There will be no index, geographical,sector or size constraints and Bedlam hopes forthe new trust to have a minimum size of £35million and a capacity at £100 million.

It will be able to gear up to 20% once the netasset value (NAV) has risen by at least 10%. Andsome sensible risk constraints have beenimposed – for example the trust can invest amaximum of 7.5% of the portfolio into a singlestock and buy a maximum of 10% of anyindividual company with no more than 10% inunlisted stocks.

Bedlam believes the new fund’s uncon-strained nature will make it more attractivethan mainstream Global Growth trusts, such asForeign & Colonial, with their high UK/USexposures and preference for large companies,partially driven by their massive size.

It hopes to capitalise on the strongperformance of Bedlam’s Dublin-based £80million Global fund. This trust has delivered atotal return of 99.29% over the 51 months sinceits launch compared with an average 66.77%from the Lipper Global Equity Global sector and

Despite offering an extra dimension to the sector, Bedlam’s decision to launch its new

Global Growth fund when the sector is trading at a 9% discount looks a strange one

a total return of 76.86% on the FTSE World index.The trust will carry an annual management fee of 0.9%, with the annual total

expense ratio capped at 1.8%. It will also impose a performance fee equal to 15%of the NAV outperformance of the one-year money market rate (subject to ahigh-water mark), rather than an equity-related yardstick.

Bedlam’s aim is for the new trust to ‘preserve capital and provide steadycapital growth’. However, potential investors should recognise its Global fund’smonthly returns have been pretty volatile – some 10-15% more volatile than thepeer group average or index and actually more volatile than the AIC–GlobalGrowth investment trust sector average, despite the gearing intrinsic to thispeer group.

They should also note the Global Growth sector’s average share priceperformance is significantly ahead of the Bedlam fund at 115.22% over the last51 months and the average Global Growth trust made 7% over the last year inNAV terms while Bedlam’s Global fund lost almost 8%.

In risk-adjusted terms, the AIC sector average’s 51-month Sharpe Ratio isalmost 25% higher than the Bedlam fund, suggesting this extra performance isnot merely a result of higher risks assumed by the investment trusts butbecause of their ability to gear.

The trust offers an extra dimension to the Global Growth sector, although itmay struggle to meet its preservation and ‘steady’ capital growth objectives.Investors should also recognise the Global Growth investment trust sector ismuch more diverse than the mainstream giant funds with some excellent trustson offer (RIT Capital Partners, British Empire Securities & General amongothers).

However, for me, the performance fee attached to this new trust, tied to amoney market benchmark, is the biggest turn-off. A concentrated, unconstrainedglobal equity fund with the ability to employ tactical gearing should beat cashover time by a significant margin and, if it does, a significant chunk of theperformance will slip, undeservedly in my opinion, into Bedlam’s coffers. Iwould give this launch a miss on this basis alone.

Bedlam’s Global offering fails to impress

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AIC Investment Trust - Global Growth (IN)Lipper Global Equity Global (IN)FTSE World TR GBP (IN)Bedlam Global (MF)

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Bedlam’s Global fund has returned 99.29% since launchSource: Lipper

by David Smithdsmith@citywire.co.uk

IMA Team Award for Excellence inInvestment Writing 2005 & 2006

Citywire.co.uk

Don’t take ourword for it -That’s the view of the InvestmentManagement Association whichgave Citywire the Team Awardfor Excellence in InvestmentWriting 2005 & 2006.

Online or in print, Citywire bringsyou the news and comment youneed to help you do your job.

Citywire Funds Insider™ New Model Adviser™ Fund Manager International™

Citywire Courier www.citywire.co.uk

SECTOR WATCH

Managers uncover Europe’s hidden value

19 April 2007 6 www.citywire.co.uk

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Mar-07Mar-06Mar-05

Scottish Widow Investment Partnership’s Alister Hibbertmade profits in Germany and Greece

by Matt GoodburnThe Europe excluding UK sector produced lucrative returns over the 12 monthsto 31 March 2007, with the average manager in the sector delivering 10.52%.

The best performer was JO Hambro Capital Management’s Willem Vinke wholaunched the £12 million Continental Select Values fund in March 2006.

Vinke returned an impressive 22.61% over the year, almost 2% ahead of hisnearest rival. He utilises an unconstrained investment approach on the fund,which holds between 30 and 40 stocks with a maximum weighting of 10% inany one stock.

Vinke told Citywire he seeks companies that he believes are trading at arounda 25% discount to their intrinsic value. He is underweight banks and is focusingon industrials, consumer services and healthcare stocks.

Second to Vinke is Rob Burnett, manager of the £55 million NeptuneEuropean Opportunities fund, which has returned 20.98% over the period.

Citywire AA-rated Stuart Fraser, who runs the £60 million Standard LifeInvestments European Equity Growth fund, is up from seventh place last yearto third with an annual return of 18.82%.

The key driver for Fraser’s investment strategy is to identify European stockshe believes improving situations have not been fully priced in by theirrespective markets.

Just behind Fraser is Scottish Widows Investment Partnership’s AlisterHibbert who runs the £357 million Scottish Widows European Select Growthfund. Hibbert has jumped up from 16th to fourth place in the sector posting anannual return of 17.85%

Hibbert says his fund’s outperformance is driven by the group’s disciplinedinvestment process which takes a five-year investment view and examineswhere companies and countries are in their respective economic cycles.

He says: ‘Many investors and analysts spend a lot of time looking at short-term data points. We think this is a way to make money but it is difficult andcrowded.

‘We believe company earnings drive the share price and have more patiencethan some of our peers, spending a lot of time trying to work out where a stockwill be priced in two or three years down the line.’

Hibbert says the 40 stock fund seeks out entrepreneurial talent and iscurrently investing aggressively in Greece which comprises 18% of the fund,with Greek retailer Jumbo the biggest individual holding at 7%.

‘The Greek economic outlook is significantly better than the eurozoneaverage. It is getting a lot of European Community money and is currentlywhere Spain was five to ten years ago.

‘Jumbo is a fabulously set up business with a hypermarket format as good asany in western Europe in a less competitive market.’

Hibbert bought the stock in mid-2006 and has seen it more than double invalue over the period.

Germany is another overweight for the fund and Hibbert is increasingexposure to construction companies such as Heidelberg Cement which isbenefiting from a strong increase in domestic demand in the country.

Just 0.1% behind Hibbert with an annual return of 17.84% is manager of the£283 million Baring European Growth fund and newly Citywire AAA-ratedJames Buckley.

The ability to findundervalued stocks sawmany star managersproduce strong returns inthe Europe excluding UKsector over the past12 months

All graphs sourced to Citywire Financial Publishers www.citywire.co.uk (020 7840 2250)

Rankings based on 1 year MR* in the Europe excludingUK sector at 17 April 2007

Sector TrackingName MR* error Contributing fund

James Buckley 1.30 3.81 Baring European GrowthRob Burnett 1.02 7.90 Neptune European Opportunities Stuart Fraser 1.00 5.89 Standard Life Inv European

Equity Growth Ret Willem Vinke 0.96 10.21 JOHCM Continental Select

Values Retail Leon Howard-Spink 0.96 4.06 Schroder European Alpha Plus

Managers ranked by their sector-specific manager ratio

*Citywire’s exclusive manager ratio (MR) is a measure of how much value inpercentage terms is added for every unit of risk taken on an annualised basis. An MR of 0.5 is considered good and over 1 excellent.

SECTOR WATCH

How to read the performance tablesThis column highlights the manager’sperformance in discrete one year timeperiods. The figure takes into accounttheir work on the different funds theyhave run during the period under reviewwithin the IMA sector under analysis.

Discrete quarter-by-quarteranalysis of fund manager

This column identifies the funds currently managed by theindividual manager in the specific sector. Funds have to beactively managed funds available to retail investors to qualifyfor inclusion. This means passive funds and institutionalfunds are excluded from analysis.

www.citywire.co.uk 7 19 April 2007

market sell-off and SociétéGénérale at the end of2006.

Swiss banking groupJulius Baer has producedthe best performance forthe fund in the first threemonths of 2007.

‘The group has benefitedfrom recent strongoperational newsflow andis seeing the benefit of thesynergies from its takeoverof asset managementgroup GAM 18 monthsago,’ he says.

Buckley says the funddoes not take deliberate big sector bets meaning it has lower risk profile thansome of its peers, and holds stakes in mega-caps such as pharmaceutical stockRoche, insurance group AXA and energy company Total to give it a defensiveelement in more volatile markets.

‘Overall the portfolio is not very defensive and is positioned for continuedreasonable growth,’ says Buckley.

SVM’s Colin McLean and Hugh Cuthbert returned a creditable 16.54% returnin the first year running the Continental Europe fund to be placed seventh.

The following five pages show five discrete years of fund managerperformance data for the Europe excluding UK and North America sectors,broken down quarter-by-quarter in each year. Citywire Courier covers the24 key unit trust sectors regularly.

After running the £283 million fund for the pastthree years, Buckley has received the highestpossible Citywire rating in the first month he hasbeen eligible.

Buckley says industrial stocks have done well forthe 49 stock fund and the recent takeover of steelfirm Arcelor by Mittal has produced a doublebenefit for the fund.

He says: ‘We bought Arcelor at the start of 2006and its price benefited from Mittal’s interest.When it was bought out we had the option oftaking cash or shares for Mittal but we took 100%in shares because we thought Mittal lookedundervalued.’

Other bid subjects in the last twelve monthsincluded tobacco firm Altadis and Puma.

Buckley says his holding in Irish drinks firmC&C also boosted the fund’s performance.

The firm became the biggest holding in the fundat around 3% before Buckley took some profitsand cut it back to 2%, in line with the rest of thefund’s holdings.

He says: ‘C&C has been a phenomenal performerover the last year and its share price doubled overthe period. We took some profit in the last quarterof 2006 because the weighting got up to 3% but wehave recently have been topping it up onweakness.’

Buckley has also seen recent strong performancefrom financials, adding Credit Suisse in last May’s

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120Average Europe Ex UK managerJames Buckley

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Baring’s James Buckley says industrial stocksboosted his performance

All graphs sourced to Citywire Financial Publishers www.citywire.co.uk (020 7840 2250)