Skip to the content

Bill Mott retires – and alternatives to the Psigma Income fund

15 July 2014

The former FE Alpha Manager was a top performer in the 1990s and early 2000s, but he has been less successful with his latest venture.

By Joshua Ausden,

Editor, FE Trustnet

Bill Mott is set to retire from Psigma at the end of the year, leaving the running of the £381m Income portfolio to current co-managers Gervais Williams and Eric Moore.

ALT_TAG Moore will take over as lead manager, while small cap expert Williams will remain a co-manager. It has been confirmed that Mott will remain on the team until he leaves the firm at Christmas.

Psigma says there will be no change to the investment objective of the fund or to its thematic investment approach. It will remain a predominantly mega cap fund, with three-quarters of its assets in the FTSE 100 and other overseas equivalents. However, Williams will continue to draw on his expertise in small cap dividend-paying companies, as expressed in his top-performing CF Miton Multi Cap Income portfolio.

Mott (pictured) is one of the best known equity income fund managers in the UK market, having spent 30 years at Credit Suisse. He ran the firm’s two flagship income funds until 2003, as well as a number of growth and mid cap mandates.

His big macro calls proved correct on the whole, leading his funds to perform very well during the bursting of the dotcom bubble, for example.

The former FE Alpha Manager made a return to fund management in April 2007 with the launch of the Psigma Income fund, but performance has not lived up to expectations.

According to FE data, the fund has returned 15.65 per cent since launch, putting it significantly behind both the IMA UK Equity Income sector average and FTSE All Share.

Performance of fund, sector and index since launch

ALT_TAG

Source: FE Analytics

In recent years, the managers’ macro calls have proved to be less successful.

A big position in banks in 2007 and 2008 hurt the fund considerably, and Mott’s belief that high inflation would occur as a direct result of quantitative easing has yet to play out – although reports today showed that the consumer price index (CPI) spiked unexpectedly in June from 1.5 per cent to 1.9 per cent.

Poor stockpicking has also weighed on Psigma Income’s returns. Moore explained the reasons for Psigma Income’s underperformance in an interview with FE Trustnet last year.

Moore has been co-manager of the fund since May 2010, with Williams joining the team late in 2013.


Performance has improved slightly in recent months, with the fund posting top-quartile returns of 2.25 per cent year-to-date.

Performance of fund, sector and index in 2014

ALT_TAG

Source: FE Analytics

For holders of Psigma Income who are concerned by Mott’s announcement, there are a number of large cap focused alternatives in the UK Equity Income sector.

FE Alpha Manager Neil Woodford is an obvious choice, given his long and established record of calling macro and sector trends.

He too performed very strongly during the dotcom crash, but also followed this up with a strong run in the down years of 2008 and 2011.

The manager’s newly launched CF Woodford Equity Income fund is invested predominantly in large caps, with nine of his top-10 companies sitting in the FTSE 100.

Like Williams, Woodford attempts to add value through much smaller companies at the bottom end of the portfolio, as explained in an FE Trustnet article earlier this week.

Performance of Woodford vs peers since Jan 2000


ALT_TAG

Source: FE Analytics

Woodford is currently cautious on the UK recovery, believing that the last five years of strong stock market performance will not be repeated. Traditionally defensive pharmaceuticals and tobacco stocks are among his favoured sectors.

The same can be said of another potential alternative – Mark Barnett, who runs the Invesco Perpetual Income, High Income and UK Strategic Income portfolios.

He is also refusing to buy into the market optimism, preferring instead to back quality dividend-payers with sustainable earnings growth.

Barnett took over the multi-billion pound Income and High Income funds from Woodford in March of this year, but he has run the Strategic fund since January 2006.

All three of the funds have beaten Psigma Income as well as the All Share since April 2007, with less volatility.


Performance of funds and index since Apr 2007

ALT_TAG

Source: FE Analytics

Invesco Perpetual UK Strategic Income’s smaller size has allowed Barnett to add value via mid caps, which goes a long way in explaining its superior performance versus Invesco Income and High Income.

Speaking of flexibility, one of the smaller and lesser-known alternatives to Psigma Income is Hugh Yarrow’s £92m Evenlode Income portfolio.

Like Mott, Yarrow has long believed that inflation will be a natural result of quantitative easing, but in the nearer team believes disinflation and even deflation are very possible.

For that reason, he has looked for large cap companies with strong brands and good pricing power, which he says are able to withstand all three eventualities.

This has proven very effective, with his fund posting top-quartile returns of 45.95 per cent over a three year period.

Evenlode Income has also been significantly less volatile than its peers.

Performance of fund, sector and index over 3yrs


ALT_TAG

Source: FE Analytics

Yarrow is invested predominantly in large caps, but says he is prepared to significantly increase his small and mid cap exposure when he thinks the time is right.

FE Alpha Manager Leigh Harrison’s Threadneedle UK Equity Income fund is another possible option.

The FE Research team says that Harrison’s ability to spot macro-trends complements co-manager Richard Colwell’s strong stockpicking.

“As head of equities at Threadneedle, Harrison is best suited to understanding the global picture of the equity markets and identifying global trends that will impact stocks over the medium- to long-term,” the team said.


“The two managers complement each other well: Colwell’s strengths lie in analysing and identifying UK-listed companies that will profit from the global trends identified by Harrison.”

At £2.9bn, the Threadneedle fund doesn’t have the flexibility of the sub-£500m Invesco Perpetual UK Strategic Income fund, though the FE Research team points out it places more of an emphasis on capital growth than the average UK Equity Income portfolio.

Threadneedle UK Equity Income is a top-quartile performer in its sector over three and five years. It was launched in May 2009.

Commenting on Mott’s decision to retire, Ian Dighe, executive chairman of Miton Group, said: “Bill has made an outstanding contribution to the fund management industry in the UK. Together with my fellow board members, we would like to wish him a very happy retirement.”

Head of sales and marketing at Miton Ian Chimes added: “Bill has been a great friend and colleague to many of us through all those years at Credit Suisse, Psigma Asset Management and over the past year at Miton.”

“He leaves the group with our best wishes for his retirement and leaves the fund in good hands with Eric and Gervais.”

ALT_TAG

Editor's Picks

Loading...

Videos from BNY Mellon Investment Management

Loading...

Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.