The redemptions come in the aftermath of news that star manager Richard Buxton (pictured) is set to quit the group in favour of Old Mutual later this year, which was announced back in March. According to FE outflows data, more money has been pulled out of the Schroder UK Alpha Plus fund than any other in the entire IMA unit trust and OEIC universe over the last year.
Schroders wouldn’t confirm the exact redemption figure over three months, but a spokesperson said: "Redemptions have been manageable so far, at around 20 per cent of the fund."
Assets under management (AUM) have fallen from a high of £3.7bn in mid-March to £2.46bn at the time of writing. The outflows have coincided in a fall in the market, which has also had an impact on fund size.
It is clear many investors have reacted negatively to Buxton’s departure, whose coveted high-conviction style led the UK Alpha Plus fund to strong relative and absolute performance throughout the 2000s.
Our data shows it is a top-decile performer over a 10-year period, with returns of 214.17 per cent.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
FE Alpha Manager Philip Matthews, formerly of Jupiter, is set to take over from Buxton when he leaves later this summer.
Schroders says the outflows have been perfectly manageable and have not impacted the way the fund is run.
FE data suggests this view is justified, given that the fund has outperformed both its sector and index over the past three months.
Performance of fund vs sector and index over 3months
Source: FE Analytics
Head of FE Research Rob Gleeson says it is worth keeping an eye on whether redemptions continue, but he says existing investors should not be too concerned at the moment – as long as they understand what the incoming manager will bring to the table.
"It’s something we’d flag up," said Gleeson. "The real work is done before the outflows occur, because Schroders would have been aware of the fund’s liquidity, and how long it would take to liquidate all holdings."
"As a surprise, £800m of £1bn would be tough, but depending on how much notice Buxton gave them, you’d have thought they were prepared for outflows."
"The fund is still very big at just under £3bn and so Schroders wouldn’t have to worry about cutting costs and laying people off."
"The portfolio will be going through a period of transition at the moment because you’ve got a new manager coming in, and so maybe some of the smaller holdings have gone in anticipation of his arrival."
"Over the next year there will be some transition in the portfolio, but it should be a gradual process."
Gleeson points to Aviva UK Equity Income as an example of a fund that has been adversely impacted by a change in manager.
"The previous manager had a poor time in 2008 and left the firm, and the incoming manager [Chris Murphy] overhauled the portfolio. It took him a good year to get things changed, and over that time the fund underperformed."
"The difference here is that the fund is already a good one and has been performing well, and so an overhaul might not be necessary.""A transition period isn’t ideal, but more important is knowing what kind of manager Philip Matthews (pictured) is, and how his style and resources when he was working at Jupiter will be impacted by a change in firm."
Gleeson says the size of the fund means that wholesale changes are very unlikely, and expects Matthews to make changes slowly.
"I wouldn’t expect to see a top holding being suddenly sold, because Schroders wouldn’t want to spook existing investors," he said. "A firm like that has the tools in place to ensure a smooth transition."
Matthews led the Jupiter Growth & Income fund to a great deal of success during the last decade: our data shows the fund is a top-quartile performer in its IMA UK All Companies sector over one, three, five and 10 years.
