The fund management industry was rocked by Dean’s decision to leave Schroders last month and Sanditon announced this morning that she will be teaming up with her ex-Cazenove colleagues Tim Russell and Chris Rice – who co-founded the boutique – in spring 2015.
Russell and Rice currently run the TM Sanditon European Select and TM Sanditon European funds, though the plan is to launch a long/short UK Select fund later this year and a long-only UK fund in 2015 which Dean (pictured) will be involved with.
“I am delighted that Julie Dean has decided to join Sanditon, demonstrating our commitment to become a leading provider of pan-European equity products,” Russell said.
“I am pleased that our long-term working relationship is being renewed and all of us at Sanditon are looking forward to the many opportunities and challenges that lie ahead in providing a range of competitive products for our investors.” Dean developed a strong investor following as manager of the Schroder (formerly Cazenove) UK Opportunities fund, and for good reason.
She headed up the fund between December 2002 and September 2014 and, according to FE Analytics, it was the tenth best performing portfolio in the highly-competitive IMA UK All Companies sector over that time with returns of 313.72 per cent, beating its benchmark – the FTSE All Share – by 120 percentage points.
Performance of fund versus sector and index between Dec 2002 and Sep 2014
Source: FE Analytics
Though its relative performance in the years building up to the financial crisis was somewhat average, it is among a very small handful of portfolios which beat the sector and index in every year between 2008 and 2013.
That strong performance meant Dean’s fund attracted substantial inflows, however.
Our data shows its AUM was just £160m this time three years ago, while at the start of 2014 it weighed in at £2.8bn. The growing size of the fund, which has since shrunk by £500m after her departure, was seen as one of the major reasons for its lacklustre performance over the last 12 months.
Performance of fund versus sector and index over 1yr
Source: FE Analytics
However, now that Dean is likely to be running a much smaller pool of money at Sanditon, Rob Morgan – pensions and investment analyst at Charles Stanley Direct – says he will be looking to invest.
“I think it is interesting because there were question marks over her UK Opps fund at Cazenove and Schroders because her style is quite aggressive: she likes to move her fund around quite rapidly and her turnover is high,” Morgan said.
“Obviously, all that is easier to do with a smaller fund.”
“I’m sure she will attract a lot of attention and assets but it will be a smaller amount than she was running at Schroders and that will suit her. I think she could thrive in that environment. It’s definitely one we will be looking at because she has an excellent track record and the size of her new fund will allow her to hold mid-caps without potential liquidity constraints.”
Ben Willis, head of research at Whitechurch, also had reservations about the growing size of Dean’s old fund and says that though Schroders stopped marketing the fund, it made a mistake by allowing money to continue to flow into the portfolio.
He therefore says he will be watching Dean’s new launch with interest.
“I think it’s evident that she prefers running money at a smaller firm and definitely prefers having control about how large her fund can become,” Willis (pictured) said.
“We have a history with Julie Dean and we will definitely have a look at it because our clients had a lot more good times than bad times with her, it’s just a shame how it ended. I’m sure she will follow pretty much the same business cycle process and I’m sure she will have much stricter constraints on how much money can come into the fund.” Willis says he won’t be rushing into the fund, however.
He sold Schroder UK Opportunities the day Dean left and after a few weeks of searching, he and his team have chosen FE Alpha Manager Derek Stuart’s £1.2bn Artemis UK Special Situations fund as a replacement.
The Artemis fund has outperformed the IMA UK All Companies sector in eight out of the last 10 discrete calendar years. That means it has beaten both the sector and the FTSE All Share over a rolling 10-year period with returns of 130.52 per cent.
Performance of funds versus sector and index over 10yrs
Source: FE Analytics
Though it has underperformed against Schroder UK Opps over that time, it has had a lower downside risk and annualised volatility and Willis says he will be sticking with Stuart because of that.
“We are buy and hold, so we are not going to trade,” Willis explained.
“We replaced the Schroder UK Opportunities fund with Derek Stuart’s Artemis UK Special Situations fund. We have used him the past and he has always been pretty good at defending capital, so it was a bit of a no-brainer to choose the fund.”
“There is no way that we will think ‘well Julie Dean has launched a new fund so let’s sell Derek Stuart’. However, we will be watching it closely when it comes out.”
Ben Williams, investment manager at Saunderson House, has supported Dean in the past and though he rates her ability and her business cycle approach, he won’t be rushing into her new fund either.
As he told FE Trustnet earlier today, Williams has maintained his exposure to Schroder UK Opps as he is a fan of new manager Matt Hudson and, as a lot of investors have sold their stake in the portfolio, it is now a far more nimble vehicle.
“It’s unlikely we’ll do anything rash,” Williams said.
“It’ll probably be similar to what we did with Woodford: meet her again, understand the reasons why she left Schroders and determine whether the set up at Sanditon is conducive to generating string performance again.”
He added: “We’re certainly not going to be dumping our Schroders holdings and switching it over but we’ll look at her fund just as any other potential fund for our UK list.”