UK - Alistair Lennard denied that he had "hopped from sector to sector" in the 18-months prior to the start of the new Unilever mandate at the beginning of 1997 during his third day in the docks.
Unilever’s barrister Jonathan Sumption QC is trying to prove that Mercury Asset Management (MAM) allowed its former fund manager Alistair Lennard to negligently create a portfolio that carried too much risk.
Coming to the end of his cross-examination of Lennard, Sumption asked: “What you were doing in the 18 months before the inception of the new mandate in January 1997 was to hop from sector to sector; and you hopped from sectors like banks, that you thought would underperform, to sectors like property that you thought would outperform; do you agree?”
But Lennard answered: “I was trying to add value in the portfolio. The themes were much more dominant, and the underlying dynamics of those businesses were much more important than the sector FTSE classifications.”
Lennard was referring back to earlier evidence here in which he had said that stock selection was not based just on sectors but on the complex relationships between companies.
Sumption also said: “I suggest that you did this without any regard for risk to your portfolio should your views about the merits of the different sectors prove to be wrong, because you regarded it as a very remote possibility that your views would be wrong, so high was your confidence?”
Lennard replied: “No. Over the course of my evidence, in the last few days, I have tried to show the correlationships between various companies, and in particular highlighting banks and property. These were well thought out investment decisions, which were done on the basis of being very aware of the risks inherent within the portfolio.”
After a barrage of questions Sumption also said to Lennard: “The result [of your portfolio construction] was that while your colleagues experienced only moderate underperformance your portfolios achieved the distinction of underperforming for eight successive quarters by a margin which put them at the bottom of Mercury's range and at the bottom of the 1600 funds managed by the WM Company?”
Lennard reacted by blaming it on currency movements. He said: “When I was managing the portfolio, up until 13th May, the portfolio, up until that point, was particularly hit, in the fourth quarter of 1996; and that was by the impact of Sterling.”
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