Grand Old Duke of York leaves symbolic tale for Ashburton chief

To Dennis Phillips, Investment Director at Ashburton, the Grand Old Duke of York leaves a symbolic story. Being responsible for Ashburton's Discretionary Portfolio Service, means that Phillips follows markets, like the Duke of York's fabled nursery rhyme, both up-and-down.

Embedded in this meandering is a clear view of the world as one in which passive management will be less effective than active management; one in which personally tailored portfolios will manage expectations better than fund managers trying to fit the same glove onto all hands.

Replacement

Readers may recall that the Grand Old Duke of York had ten thousand men — but they can be easily replaced by dirhams. Actually, they need to be replaced by around Dh5 million as active Discretionary Portfolio's need that sort of figure to warrant the attention of The Ashburton service.

Thereafter the costs for the service can be negotiated from what Phillips calls a "clean" high of 1 per cent plus brokerage fees. For that, you can follow Phillips, who will look to march your money to the top of the performance hill.

I can't recall why the Duke of York took his men to the top of the hill, but for Phillips the top is an absolute return, the preservation of capital and medium term growth. This of course means that he will not be marching up any hill; markets need to be carefully selected.

And when they were down they were down. Of course everyone is an expert in a rising market.

The year 2008 carried few experts. With equity-indices looking at 50 per cent plus falls, the Discretionary Portfolios were relatively well-placed at between minus 12 per cent to minus 20 per cent on the portfolio's we looked at for 2008.

Not that Phillips views this as an achievement: "our first objective is to get last year back — which we have largely done, and look for prudent growth moving forward". To do this Phillips will use any asset class: "cash at times is a very good place to be invested" he says betraying the fact that he is keen on stop-loss policies.

It's the "downtime" management that separates the consistent performer from the high risk investment management. Ultimately, investment performance is about three things: the buy price, the sell price, and the management in-between.

Active management

In Phillips world active management is about accepting that he may not know the exact turning points of markets, but, by moving more-or-less with the markets the extreme losses will be avoided, "I don't believe in buy and hold," he says.

With 2008 in the minuses, and with the most recent half of 2009 showing excellent recovery in the Ashburton portfolio's, where are today's markets? For Phillips "we've gone from very undervalued to nearly fairly valued, but to go through the normal cycle we need to get to overvalued — and we won't be there until around the middle of next year".

This suggests that the Phillips' army is still ascending its expectation rather than protecting or descending. Although, he's not going to be taking any rise passively: "it is quite possible we will create another asset bubble through excessive stimulus" he adds.

And when they were up, they were up. So what does Phillips current ascent strategy look like? "We are currently 65 per cent in equities with more emphasis on the developing world rather than the developed world" as if we need another reminder of the west-to-east transition effect, with "resource-based" markets being favoured more than others, bringing Indonesia, Brazil, India and China to the fore.

Additionally, Phillips is currently 10 per cent in cash with his proviso "we are actively looking at putting this into equities. We expect another run on equities; the naysayers say that the market has run too fast, and yes, there are headwinds, but we are positive on the immediate future of equities".

The writer is chairman of Mondial Financial Partners International.