Somel has been on the team since April last year and currently has no experience managing any other funds in the IMA universe. French, who heads up the flagship M&G Global Basics portfolio, will take on the role of deputy manager. M&G says the move is in keeping with its process of ensuring a smooth transition between managers, and insists there will be no major changes to the way the portfolio is run.
"French becomes deputy manager, in line with the precedent set on other funds that he has handed over to new managers," said a spokesperson for the group.
"[Somel] has taken increasing responsibility for portfolio construction and stock selection and his appointment as sole lead manager is a natural progression. There will be no change to the investment approach."
M&G Managed Growth is a multi-asset fund that sits in the IMA Flexible Investment sector. FE Alpha Manager French has run it since December 1996, making him one of the longest standing multi-asset managers operating in the UK market.
Performance of fund vs sector and index since Dec 1996
Source: FE Analytics
According to FE data, the fund has delivered strong outperformance relative to its sector and FTSE World index benchmark over the period, with returns of 213.94 per cent.
The fund has also beaten its sector and the index over a 10-year period, but the fund’s bias towards global resources has seen it slip down the performance tables in recent years.
Performance of fund vs sector and index over 10yrs
| Name | 1yr returns (%) |
3yr returns (%) | 5yr returns (%) | 10yr returns (%) |
|---|---|---|---|---|
| FTSE World Index | 24.11 | 39.74 | 53.56 | 138.11 |
| IMA Flexible Investment | 16.04 | 23.94 | 23.74 | 100.7 |
| M&G Managed Growth |
10.76 | 10.8 | 16.29 | 171.7 |
Source: FE Analytics
M&G Managed Growth is predominantly a fettered fund of funds, meaning that it invests in other portfolios run by M&G. However, it has some single-stock positions, including G4S, which is a top-10 holding.
The fund currently has a 36 per cent position in M&G Global Basics, which has cost it dearly in recent years. It has returned just 9.02 per cent over the past five years, compared with 34.32 per cent from the average fund in IMA Global.
Other major positions for M&G Managed Growth include a 12 per cent position in M&G Global Growth and 10 per cent in M&G Global Emerging Markets.
The fund requires a minimum investment of £500 and has an ongoing charges figure (OCF) of 1.92 per cent.
As M&G mentioned earlier, it is not the first time French has given the reins of a high-profile fund to a new manager.
He headed up the M&G Global Growth fund between 2000 and 2007, leading it to top-quartile performance in its IMA Global sector over the period. Greg Aldridge took over in April 2007; according to our data, the fund has returned 45.58 per cent since then, beating both its IMA Global sector and MSCI AC World index benchmark, which are up 24.76 and 37.65 per cent, respectively.
French also ran the M&G Global Leaders portfolio earlier on in his career, between 1994 and 2001. It was then managed briefly by Greg Kerr, but he was succeeded by Aled Smith in September 2002.
According to FE Analytics, Global Leaders has comfortably beaten its sector and benchmark since then, with returns exceeding 200 per cent.
Richard Troue, analyst at Hargreaves Lansdown, says investors should not be too worried about the change in management, given that French remains involved with the fund for the time being.
"The important thing here is that [Somel and French] have worked together for quite a while, and are just switching roles," he said.
"It’s part of M&G’s process of giving more responsibility to new managers and given that Somel is already experienced and French is still there, we’re pretty relaxed about it."
"For those who were happy to hold the fund in the first place, there’s no reason to panic."
Troue does expect French to eventually leave Somel to fully control the fund at some point, but does not think investors need to worry about that yet.
"You can’t rule this out, though I wouldn’t want to second-guess what M&G will do," he said.
"It does seem to be part of their succession planning though, and it does look like French will be stepping away from the fund at some point."
The FE Research team rates the M&G Managed Growth fund highly, and includes it in the FE Select 100. The team said it would review the fund’s place on the list during the next rebalancing.
In a busy day of manager moves at M&G, Alex Odd has left his role as manager of the £1.4bn M&G Dividend fund, and has been replaced by FE Alpha Manager Phil Cliff.
FE Trustnet identified the Dividend fund as one of the few "giant underperforming funds" in the IMA UK Equity Income sector, since it has more than £1bn under management and has underperformed its peer group and sector over three, five and 10 years.
Performance of fund vs sector and index over 3yrs
Source: FE Analytics
Odd has headed up the fund since June 2010, but has failed to deliver consistent outperformance. He will leave M&G with immediate effect.
Cliff currently heads up the M&G Pan European Dividend fund, which has 34 per cent of its assets invested in the in the UK.
"He has 13 years of experience in fund management and is ideally placed to take on another fund, applying the disciplined investment approach championed by Stuart Rhodes, manager of the M&G Global Dividend fund," said M&G.
"This approach favours sustainable dividend growth. John Weavers remains deputy manager of the fund."
Cliff previously ran funds at Threadneedle and Liontrust. Our data shows he has significantly outperformed his peer group composite since he started running IMA portfolios back in 2004.
Performance of manager and peers since Jul 2004
Source: FE Analytics
Note that the flat periods in the graph above illustrate times when Cliff was not running any funds in the IMA universe.
