Allsopp has become the firm’s pin-up in more ways than one. He is one of three young managers who feature in New Star’s billboard and press adverts for this year’s Isa season. And he has made regular appearances in Tatler magazine’s little black book of eligible young men and women.
He joined New Star in January 2001, after studying at Eton and the University of Newcastle, where he gained a BA degree in the history of architecture. During his first three years at New Star, he worked as an analyst alongside Tim Bray, who runs institutional money, and Tim Steer, manager of the firm’s UK Alpha fund.
By October 2003, Duffield had enough faith in Allsopp’s ability to hand him the reins of Hidden Value, a fund he had bought from Exeter Asset Management that year. His conviction seems to have been rewarded: Hidden Value has gained 74% since Allsopp took over, compared with 44% for the FTSE All-Share index and 41% for the average fund in the UK All-Companies sector.
In 2004, Hidden Value was ranked second out of 297 funds in the sector, returning 32% compared with 13% for the All-Share.
Its performance slipped last year, but the fund still appeared in the top 25% of its sector with a return of 26% against 21% for the All-Share.
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Despite these strong returns, some advisers remain hesitant about Allsopp. Justin Modray of Bestinvest said: “The performance of the fund has certainly been exceptional since Allsopp took over, but we generally like to see a five-year track record to make sure the performance is due to skill rather than luck.”
Allsopp is the first to admit that his lack of experience puts some people off. “I have got to build up a record over a longer period and keep my performance up,” he said. “After five years, many people will change their attitude.”
He thinks that his disciplined approach to analysing companies and their managers should assuage reservations about his lack of experience. Tatler called him a “cool cat” in its little black book, and it seems Allsopp takes a similarly dispassionate approach to fund management.
He said: “The key to my fund is analysing firms and meeting the management. I rarely invest more than 0.5% of my fund in a company without meeting the directors, so I have a huge number of management meetings — usually three a day. It’s about looking into the whites of their eyes and going through their business plans to see if they have the cash, the growth and new areas to move into.”
As the name of Allsopp’s fund suggests, he seeks out promising companies that have been missed by the rest of the market. He uses a system called “economic value added”, or EVA, to work out if a company is creating value for shareholders and whether this is reflected in the company’s share price.
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He said: “EVA analysis is not widely used in the City, but it is a disciplined way of looking at a company and getting to know the business.”
It helps if the firms flagged up by EVA analysis operate in “niche” areas — sub-sectors of the market that Allsopp thinks will exhibit strong growth once everyone else latches on.
He is focusing on six niche themes at present — the war on terror, investment banks, government expenditure, recycling and renewable energy, emerging technologies, and Chinese growth — but he is most evangelical about “green” stocks.
He said: “I played the green theme last year and will continue to do so. Tory leader David Cameron has said we need to reduce our reliance on fossil fuels for environmental reasons, but there is also a political imperative to cut our exposure to volatile parts of the world, such as Russia, where most of our fossil fuels come from.”
For example, he owns shares in Clipper Windpower, an American company that makes wind turbines.
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As with most fund managers who seek out overlooked companies, Allsopp’s hunting ground is primarily among smaller firms. They account for 54% of his fund, compared with 15% in blue chips, 24% in medium-sized firms and 7% in cash and overseas stocks.
This worries some observers. Modray said: “It is not surprising that Jamie has done well over the past two years, because smaller companies have outperformed blue chips. He has no experience of a tougher market for small firms.”
Allsopp admits life could get more difficult if the tide turns in favour of blue chips. “Bigger companies picked up in the second half of last year and if they continue to do so my job will get harder because I am always going to have less in blue chips such as Shell or Vodafone than a tracker fund would. However, I have just over 100 stocks in my portfolio and I think many are looking cheaper and exhibiting better growth prospects than the big blue chips, so I would still hope to beat the market,” he said.
Many of Allsopp’s backers are convinced his disciplined approach to companies will help him weather any pull-back in smaller-company shares.
One fan is Gary Potter, who runs several “funds of funds” for Credit Suisse Asset Management. These are schemes that invest in a portfolio of funds from other managers, and he was one of the first external investors to back Allsopp when he put £4.5m in the Hidden Value fund in January 2005.
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Potter said: “We felt Allsopp had a mature way of thinking about companies — their growth prospects and the trade-off between risk and reward.”
Duffield’s backing also helped, of course. And Potter points out that Allsopp sits on New Star’s UK Equity desk which includes Stephen Whittaker, who runs the UK Growth fund, and Patrick Evershed of Select Opportunities. Between them, the UK desk has more than 100 years’ experience.
However, you should not rush out and buy Hidden Value as the core part of your portfolio because it can be volatile.New Star views the scheme as a “satellite” fund that will add spice to a balanced portfolio, but should not be used for the bulk of your money.