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Adviser  >  News  >  August 2008  >  Fund Manager Spotlight

Fund Manager Spotlight

Mark Breedon, Manager of Investec Global Free Enterprise

Mark Breedon joined Investec Asset Management in January 2003 as a portfolio manager following a long stint at Alliance Capital where he spent time as a portfolio manager as well as serving on the board of Alliance Capital Ltd.

Mark’s team at Investec Asset Management have taken a deep understanding of behavioral finance, and applied this by creating an investment process, known as 4Factor™ which has delivered exceptional returns.

Fund Strategy

Mark and his team target companies which are subject to change, either internally or on a broader sector basis. He has a list of dynamic themes in which these companies can be found, but for Breedon the key to this process is to identify companies undergoing changes which are not accurately reflected in their share price.

“Wherever there is significant change in an industry, the possibility exists for anchoring – hence the mandate of the fund includes such investment areas as company spin-offs, demutualisations, deregulation, privatisation and so on. All of these are areas where people might potentially be anchoring to the old business or market environment. We sit down every week with our analysts, asking them to review the companies in their sectors that are impacted by these key drivers”.

After an initial stock screen of the 4,500 companies in their investment universe, which reduces the universe to the 500 stocks most impacted by the key drivers, the Global Free Enterprise Team use a ‘four factor model’ to help them avoid some of the key behavioral errors that investors can make. Behavioral tendencies can for example cause people to be over confident, to follow a herd mentality or to remain anchored to the past. However much we like to think that we are different, these traits are inherent in human nature. Using a quantitative process as part of the evaluation process removes some of the emotion that can interfere with making the right decision.

Mark’s ideal stock would be a higher quality company than its peers, on a lower valuation, where profitability has been recognised as improving and share price is showing an initial improvement. The four factor model scores stocks on each factor and the final score guides Mark and the team on which ideas they should do more in depth work on.

“We recognise that people’s behavioral biases are often responsible for mis-pricing in the global equity space. Simply put, people tend to ‘anchor’ their opinions to the past, and find it difficult to adjust their expectations to something new.”

Find out more about Investec Asset Management.

Personal

Whilst Mark’s background is in Economics, he still likes to stretch his mind away from the office by playing bridge and chess. At weekends he can often be found on the golf course, and occasionally on the banks of a river attempting to fish – usually with limited success!