Top-performing fund manager Julie Dean will be taking the helm of the TM Sanditon UK fund when it launches on 22 June, according to an announcement from Sanditon Asset Management yesterday. 
The new fund will have a similar approach to the top-performing strategy she ran at Cazenove and Schroders as it will follow the “business cycle” approach, which involves active stock-picking based on how the business cycle impacts companies’ stock market valuations and earnings growth.
“I am thrilled to be at Sanditon Asset Management alongside former colleagues Chris Rice and Tim Russell and to announce the launch of the TM Sanditon UK fund,” Dean (pictured) said.
“I will manage this new fund following exactly the same business cycle philosophy I have used for more than 15 years, an approach whose key characteristic is understanding correlation of returns and which remains as powerful as it has ever been.”
“I am confident that this process will continue to generate very competitive returns and that my new fund will be a compelling new entrant in the IA UK All Companies sector. I look forward to commencing the joust!”
Dean built up a strong investor as manager of the Schroder (previously Cazenove) UK Opportunities fund, but shocked the industry in September last year when she unexpectedly left her new employer after just a year and a half.
Her 12-year tenure of the fund consisted of stellar top-quartile performances, with the fund returning 313.72 per cent between December 2002 and September 2014, outperforming its sector average by 133.63 percentage points and its FTSE All Share benchmark by 123.1 per cent.
Performance of fund vs sector and index over manager’s tenure
Source: FE Analytics
Following sector beating returns in each calendar year between 2008 and 2013, her final 12 months in charge of the fund were far from superior, though, as FE data shows Schroder UK Opportunities was bottom decile with returns of just 0.45 per cent.
Performance of fund versus sector and index between Sep 2013 and Sep 2014
Source: FE Analytics
Following her departure, her portfolio was handed to Matt Hudson who also manages the Schroder UK Alpha Income fund. Despite Schroder UK Opps’ particularly poor 2014, AXA Wealth’s Adrian Lowcock doesn’t think that this should deter investors from considering Dean’s fund.
“That weaker performance came about as mid-cap stocks had a significant sell-off which impacted on the fund,” he explained.
“Twelve months is too short a term to make any serious criticism of a fund manager’s ability – each style has periods of outperformance and Dean’s is no different. I fully expect she will continue to deliver on her long-term track record.”
While Dean remained highly rated within the industry during her time at Schroders, many criticised the growing size of her fund which peaked at £2.8bn at the start of last year. Though there were many fund’s which had larger AUMs, the fact that she had historically run a high portfolio turnover rate due to her business cycle approach was seen as an issue.
Ben Willis, head of research at Whitechurch Securities, said: “In the case of Dean, I think it was illiquidity that became her undoing during the end of her time at Schroders.”
“The mandate was allowed to get too big, which led to a compromise in positioning and style as Dean’s track record was primarily driven by her positioning in UK mid cap using the business cycle investment process. It is disappointing that she decided to leave Schroders at the first sign of adversity; however, there may have been other factors at work, who knows.”
However, in an FE Trustnet article published in June last year, the star manager said that her underperformance was nothing to do with the fund’s size.
“What I would say is that short periods of underperformance aren’t unusual and we have been here before during my time managing the fund and I’m sure there will be more periods of weakness in the future,” she explained.
Instead, she attributed the fund’s performance to stock selection, pointing out that she held both Just Retirement and Partnership Group when the chancellor made his changes to the pension system in the budget, as well being too slow at shifting her portfolio from mid-caps to large-caps.
Some commentators have pointed that Dean has always performed better at smaller boutique asset management houses than during her time at Schroder’s and HSBC earlier in her career. As a result, they say her move Sanditon should be viewed as a positive.
Patrick Connolly, head of communications at Chase de Vere, said: “Many fund managers fail to reproduce previously strong performance when moving companies, much the same way as many footballers play well for one club and then don’t match that form when they’re transferred to another.”
“We have recommended Julie Dean to clients previously and she’ll be using an identical investment approach at Sanditon as she did at Cazenove and Schroders and so has every opportunity to do well.”
Not only is her investment approach set to remain the same, she will be joining her former Cazenove colleagues Chris Rice and Tim Russell, who joined forces to launch Sanditon Asset Management at the end of last year.
As a result, Dean will be running a lot less money at a boutique firm, minimising liquidity concerns. She will also be using investing techniques she is comfortable with – the fund will invest in 35 to 65 equity securities listed by UK companies.
“Given she has joined her former colleagues at Sanditon who share the same approach we should expect few changes to her management style,” Lowcock added.
Meera Hearnden, senior investment manager at Parmenion, said: “Julie Dean is an underrated manager in my view and she delivered some exceptional performance while at Cazenove before it got taken over by Schroders. She has a focused approach which can at times lead to higher volatility. Investors that are willing to take on additional volatility have the potential to benefit from her skills as a fund manager.”
However, Connolly warns that it is prudent to take note of how Dean settles into her position at Sanditon before any decisions are made.
“Julie Dean is a proven fund manager who has produced strong returns for investors over many years. However, we want to see her producing the goods with this new fund before we start using it. There are no guarantees she will do as well in her new environment,” he said.
The fund will have a clean ongoing charges fee (OCF) of 0.86 per cent.
