Instead it has favoured sectors such as food producers, basic industrials, utilities and building materials. The firm has also moved substantially into cash after Mr Dye took the view in the mid-1990s that equity markets were set to fall.In recent years the technique has proved a disaster. As markets became obsessed with the "new economy", the old economy sectors favoured by P&D plunged. In last year's CAPS survey of fund manager performance the P&D finished 66th out of 67 firms with an annual return of just 11 per cent This compared with a median performance of 21 per cent. The figures for the first quarter of this year are also expected to be poor.P&D's list of major investments reads like a roll call of the walking wounded.
They include Somerfield, where P&D holds a 22 per cent stake, and United Biscuits (5 per cent). Previous duds included Sears and Dalgety.One senior fund manager says: "The key to P&D is that it was an aggressive contrarian investor and that's what unstitched them. It got to the stage where they were taking the view 'it's only worth getting it right if everyone else is getting it wrong'. There was a degree of arrogance and it got to the stage where they were buying things just because they were going down. One you've got into that kind of hole it's very difficult to get out."This could be the key to the firm's fall from grace Pension fund trustees are, by nature, cautious folk.
They want to outperform the benchmark average by a few percentage points each year if they can. What they hate is volatility, which is what P&D has delivered in spades.P&D's pension fund clients have started to take their business elsewhere. Marks & Spencer withdrew a £600m pension fund from P&D's management last year. South Staffordshire County Council moved its £250m from P&D late last year and yesterday announced ING Barings had won the mandate.Rivals say the string of defections is not surprising. "P&D had a great run in the late 1980s and early 1990s," one fund manager says "They outperformed year after year and .. they would have looked very good in business presentations.
They would have sucked in an awful lot of money in that period But now the trustees might have a bit of a problem. They will be asking themselves 'why have we got 100 per cent of our fund with an aggressive value investor?'"Where does P&D go from here? Experts predict a shake-up at the firm, which is part of Swiss banking group UBS. Last month UBS put P&D and UBS Brinson, its US sister company, under one roof with Global Investment Management and said it would "develop a wide variety of investment styles".Senior fund managers say this is likely to see P&D gradually dump some of its worst performers and quietly increase its holdings in growth sectors like telecoms and media. The worry then would be that P&D would have effectively removed its franchise and become like almost every other fund management group.