Phillips & Drew (P&D) has been awarded a £100m passive global equities mandate by the UK pension scheme of oil company Conoco.
The win comes at the expense of US-based Du Pont Capital Management, which had a £200m brief split 70/30 between UK equities and overseas equities. Du Pont retained £100m of the money. Watson Wyatt advised the scheme. A spokesman for the scheme confirmed the appointment but said contracts have not yet been signed.
The win is part of the trend of P&D’s re-emerging fortune following catastrophic haemorrhaging of its institutional business due to bad performance in 1999.
The manager had £119.1bn core institutional assets at March 31, 2001. But, although P&D has lessened the tide of institutional money exiting the firm it has not completely stemmed the flow. Its net new money trend has improved its position by roughly £13bn over the 12 months to Q1, 2001 but the figure is still in negative territory by more than £1bn. New mutual fund money is picking up, however, and P&D is also encouraged by the amount of new passive business it is picking up.
P&D has renamed its value strategy ‘price-intrinsic’. Chief executive Robin Hindle-Fisher said: “It’s not enough just to buy cheap companies. You have to buy cheap companies that are going to become expensive.”
P&D attributes as a key driver to its relative success in UK equities - compared with other managers - the collapse of Vodafone’s share price since February 2000, a stock in which it was underweight. Hindle-Fisher explained: “We are in the middle of a very strong return to value.”
Stocks which P&D recommends are Hays and Rentokil. Hugh Sergeant, head of UK equities, said some TMTs are now in “undershoot territory” - effectively becoming value buys. P&D expects profit warnings to continue and will buy-in gradually. Granada and Carlton were also reckoned undervalued. Sergeant said: “TV advertising is seeing a cyclical rather than a sectoral downturn.”
According to Hindle-Fisher, P&D benefited from its integration into UBS’s asset management business, and the shake-up of the firm’s structure following the Brinson merger in March 2000. But it has been the return to value that has contributed most to P&D’s success.
P&D predicts the CAPS median for the last quarter to June 30, 2001 - figures for which will be released in the next few days - to be near 1%, while P&D’s outperformance will be +0.6%.
On the introduction of the new FTSE4Good index, P&D said its policy had long been one of engagement with companies. Agreeing the index will be more useful to managers which do not have a socially responsible investment strategy but want to offer a passive SRI fund, Hindle Fisher added: “I don’t envisage managing a significant number of mandates against FTSE4Good.”
On September 6, Paul Yates takes over the helm from Hindle-Fisher, who is taking a year off to study for an MBA at London Business School. Yates is currently head of strategic planning and communication at UBS Asset Management.
By Luke Clancy
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