11 February 2010

Alpha Males

Authorised and Regulated by the Financial Services Authority, Trustnet is a free website devoted exclusively to independent research. It doesn't offer any transactional facilities to its users and it doesn't offer any advice on investments. The data on Trustnet's website is supplied in conjunction with Thomson Financial Limited, The London Stock Exchange Plc, SRPAdviser.com and ManorPark.com. It's an extremely valuable free tool for investors seeking to undertake their own research.The summaries on trustnet tend to be very dry and factual.  Trustnet highlights that Martin's career stretches back to 1979, joining Miton in 1994 and launching Miton Strategic in 1996 which has been "the top fund in sector since launch" and gives the following Trustnet verdict on MBMG Group's co-portfolio advisor, Martin Gray"Overall, performing better than the peer group composite. Over a long track record, the manager has outperformed the peer group more often than not. Good stockpicking has had a material positive impact on results, which have tended to be relatively better in a falling market."About the most fulsome that Trustnet ever gets is to rate a manager as an "Alpha Manager", which it does in Martin's case:"Martin Gray is a Trustnet Alpha Manager who has maintained a consistently high alpha score over a proven track record in rising and falling markets." Notwithstanding that by taking money off the table to avoid risk, Martin underperformed the markets in last year's liquidity rally Trustnet has the following data about Martin's longer term performance –

Cumulative performance (% growth)
	3 years	5 years	7 years	9 years
Martin Gray	23.1	51.7	119.8	96.3
Peer Group Composite	-2.6	27.2	76.7	20.5
Over / Under	25.7	24.5	43.1	75.8

Trustnet also produce a Rolling Alpha Quartile for Discrete three year periods, which shows a manager's alpha score in quartile terms, plotting his or her risk adjusted performance against all other managers in the UT & OEICs universe. The best managers are those who are consistently ranked in the first or second quartile. The blue boxes, representing Martin's track record, are in the highest quartile throughout -

	0-36m	12-48m	24-60m	36-72m	48-84m
Quartile1
Quartile2
Quartile3
Quartile4

 Trustnet concentrates on this theme of added Alpha - 

How a manager matches up against his peers gives you some idea of how talented he is. Very few managers perform equally well in rising and falling markets, so knowing which type of market a manager is capable of performing well within is also important.
Overall markets   Outperformed peer group composite 6 years out of a possible 10		Overall markets   Underperformed peer group composite 4 years out of a possible 10		Rising markets   Outperformed peer group composite 2 years out of a possible 6		Falling markets   Outperformed peer group composite 4 years out of a possible 4

From Trustnet's report we see the point that in the 4 falling markets during the last 10 years (average annual market fall of -13.6%), Martin has made a small average annual profit but conversely Martin has 'only' averaged a gain of 12.2% in rising markets although the average market increase has been over 14.9%. Technically this is perfect average downside avoidance and 80% upside capture. In simple terms Martin has averaged just under 7% per year for the last 10 years during which time the average comparable investment has averaged less than 2% BUT Martin's performance last year was one of these below market periods because he's so concerned at the risk in many asset classes right now and preservation of capital tends to be more important to most wealthy clients than speculative gains.The Trustnet report concludes with performance graphs:Total return for Martin Gray

Out of all the long term Alpha managers listed on Trustnet, Martin is ranked 7th out of 110 with the top 5 places inevitably falling to specialist equity managers whose sectors have been hot for the last decade or so. Without wishing to diminish the performance of these specialists, arguably the only comparable balanced portfolio manager in the UK to deliver an investment solution to rival Martin over that period has been the excellent Robin Geffen at Neptune.