Dobell on downgrade: Growth hasn't hurt performance
The size of the Recovery fund has been a recurring question for a number of years – ever since it moved through £1 billion really. In the world of retail funds, I can see how our fund may appear to be rather large, but in the institutional world, a fund of this size really wouldn’t look unusual at all.
When you consider the aggregate value of the companies making up the FTSE All Share is around £2 trillion, our £7 billion fund doesn’t actually look that large.
As we have always said, quite simply, size isn’t the issue for us. The investment approach hasn’t changed since the fund’s inception in 1969. We find recovery investments from large caps through to smaller companies and the proportion of large, medium and small sized companies within the fund hasn’t materially changed over the years. The growth of the fund has clearly not affected its performance.
This fund has taken over 40 years to get to this stage and remains a very viable proposition, having stood the test of time through many cycles and several market crises. More recently, challenging times for the economy have presented us with many investment opportunities and continue to do so. Finding new ideas for this fund is certainly not a problem. (article continues below)
In fact, one of the more obvious advantages of having a larger fund like this is the open access to company management it affords us. Taking a significant position in a company often ensures we have the management’s attention when we meet them – that applies to large and small companies alike.
Furthermore, our size and reputation creates investment opportunities itself. Companies actually seek us out to ask us to invest in them. This can give us a significant advantage in terms of negotiating a deal with the management.
Our number one concern is to continue to deliver good performance to our investors over the long term. We had another steady year of inflows to the fund in 2011 and we very much remain open for business now.
Tom Dobell is manager of the M&G Recovery fund.