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Three new investment trust managers who are off to a flying start

23 June 2015

Following research showing that a fifth of investment companies have appointed a new manager since the start of 2014, FE Trustnet explores three of the top-performing trusts that are under new management.

By Lauren Mason,

Reporter, FE Trustnet

Nearly a fifth of investment companies have appointed a new manager since the start of last year, according to data released yesterday by the Association of Investment Companies (AIC).

While the report shows that nearly half of AIC members have had the same manager at the helm for more than 10 years, it emerged that 18 per cent of closed-ended funds have appointed a new manager over the last 18 months.

A change in management for any investment vehicle often causes a period of upheaval as the new manager gets to find their feet and investors weigh up whether to keep their money in the portfolio or find new opportunities.

However, there are some trusts with newly-appointed managers that have performed strongly since taking over their new portfolios. In the below article, FE Trustnet explores three of these trusts that are already off to a flying start. 


Fidelity China Special Situations

Experienced Fidelity Asian equity manager Dale Nicholls (pictured) took the helm of Fidelity China Special Situations in April 2014, following the retirement of star manager Anthony Bolton.

Nicholls had large shoes to fill, as Bolton became a household name having successfully run the Fidelity Special Situations fund for 28 years.

However, sentiment turned against the manager after he returned to fund management following a two-year hiatus to manage the newly-launched Fidelity China Special Situations trust.

Uncertainty over Bolton’s long-term commitment to the trust – although the manager did set out the minimum amount of time he would stay at the helm – combined with his lack of experience managing Chinese equities led to criticism and a backlash from the press.

Despite this, the manager still handed the reins over to Nicholls having made a total return of 5.76 per cent, compared to its MSCI China benchmark’s negative return of 2.95 per cent.

Over Nicholls’ tenure, the five FE Crown-rated closed-ended fund has returned 53.27 per cent, outperforming its peer group average by more than 20 percentage points and beating its benchmark by 16.25 per cent.

Performance of trust vs benchmark and sector over manager tenure

 

Source: FE Analytics

The £1.2bn trust, which is currently trading at an 11.8 per cent discount, has achieved a top-decile Sharpe ratio, which measures risk-adjusted performance, of 3.71, a top-decile alpha ratio, which measures performance above benchmark, of 59.62 and a top-quartile annualised volatility of 16.67 per cent since Nicholls took over.

Fidelity China Special Situations is geared at 22 per cent and yields 0.8 per cent.


Edinburgh Worldwide IT

Baillie Gifford’s Edinburgh Worldwide IT is managed by FE Alpha Manager duo Douglas Brodie and John MacDougall, who have been at the helm since January last year.

The £235m trust has performed consistently well since its launch in 1998, achieving top-quartile returns over three, five and 10-year time frames, despite four changes in management since launch.

Mark Urquhart, however, managed the trust from November 2003 until Brodie and MacDougall’s appointment, which means that the most recent change in management occurred after more than a decade of having the same manager at the helm.

The trust, which is currently trading at a discount of 4.1 per cent, has managed to outperform its average peer in the IT Global sector by 2.75 percentage points, delivering returns of 18.4 per cent, with the new managers in charge.

Performance of trust vs sector over manager tenure

 

Source: FE Analytics

The outperformance follows a disappointing start to Brodie and MacDougall’s new roles, however, as in their first six months the trust delivered a negative return of 10.62 per cent, underperforming its sector average by 13.32 percentage points.

Because of this, the trust has a bottom-decile annualised volatility of 22.46 per cent, which is more than five times that of its peer average.

However, the trust has still managed to significantly outperform its average peer more recently with top-decile returns over one, three and six-month periods.

Currently trading at a discount of 4.1 per cent, Baillie Gifford & Company Edinburgh Worldwide IT is geared at 10 per cent and yields 0.4 per cent.


Mid Wynd International Investment Trust

Artemis’ Alex IllingworthRosanna Burcheri and Simon Edelsten took over the helm of Mid Wynd International Investment Trust in May last year

Since then, the closed-ended fund has doubled the performance of its FTSE World benchmark and delivered a total return of 28.2 per cent, compared to its peer group composite in the IT Global sector’s 15.13 per cent.

Performance of trust vs sector and benchmark over manager tenure

 

Source: FE Analytics

Originally a Baillie Gifford trust, Artemis has been giving the investment vehicle a drastic overhaul over the last 16 months following the retirement of Baillie Gifford’s Michael MacPhee, who had been the manager for more than 15 years.

After just two months under the new management team, 18 of the original top 20 holdings had been changed, leaving just East African Breweries and European financials firm Reinet Investments remaining, neither of which are in the top 10 currently.

The £85m trust, which is trading at a 5.2 per cent discount, now holds consumer products, financials and healthcare as its top three weightings respectively and has a 45 per cent allocation to North American equities.

Its new allocation has also led to a top-quartile Sharpe ratio of 2.8, a top-quartile alpha ratio of 7.79 and a top-quartile max drawdown, which measures peak-to-trough performance, of 1.15 per cent.

Artemis Mid Wynd International Investment Trust isn’t geared and yields 1.1 per cent.

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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.