The year has been tough for many investors with the dithering over the timing of US interest rate hikes and worries about China’s economic health leading many asset classes to hand back their gains from the earlier months of 2015.
But some funds have had it harder than others after seeing their assets fall away significantly.
FE Analytics shows there are 46 funds from the Investment Association universe that seen their assets under management (AUM) fall by more than 50 per cent over the past 12 months, owning to reasons such as large mandates being pulled from the portfolio, steady net outflows and a run of poor performance.
The fund with the largest fall in assets on a nominal basis was FE Alpha Manager Richard Woolnough’s M&G Optimal Income, which has seen assets move from £23.6bn to £17.4bn in the last year. This was prompted by net outflows of £5bn and net returns knocking off £1.1bn.
However, the fund was very large to start with so it’s ‘only’ 26 per cent smaller than it was 12 months ago. Other portfolios have seen a much greater slide in assets.
As the graph below shows, the fund that has seen the largest drop in AUM is F&C Global Bond, which our data says fell from £717.3m to £20.4m – a 97 per cent drop.
Source: FE Analytics
There’s an explanation for the significant fall in assets of this fund and other F&C products appearing on the list, however, and it’s one that was well flagged-up to investors in advance.
In February of this year, money was taken out of the funds as part of a previously announced shift of £12.2bn of Friends Life equity and multi-asset mandates from the asset management house to Schroders.
While such a large withdrawal of assets can cause problems for portfolios, F&C Global Bond manager Sujay Shah has actually had a pretty good year. While the average IA Global Bond fund has lost 1.76 per cent on a one-year view, F&C Global Bond has made a 0.68 per cent total return – putting it in the sector’s top quartile.
As can be seen from the list of those shrinking the most, many of the funds outside the F&C offerings started the year with relatively small AUMs. This means that outflows that would be seen as relatively small for a larger funds – such as £5m or £10m – can have a significant effect on their size.
If we look outside the top 10, however, we find several household names that have had to cope with sustained withdrawals.
One of these is Threadneedle American Extended Alpha, where AUM has fallen 72 per cent from £777.2m to £215m. The fund lost lead manager Stephen Moore in January 2014 after he moved to Artemis with former Threadneedle Investments head of US equities Cormac Weldon and other members of the team.
Now managed by Ashish Kochar and Neil Robson, the fund saw a steady trickling out of assets following the departure of Moore but flows appear to have stabilised somewhat over the latter half of 2015.
Threadneedle American Extended Alpha’s AUM over 3yrs
Source: FE Analytics
Kochar and Robson have managed to maintain the fund’s strong track record with the fund sitting in the IA North America sector’s first quartile over 12 months with a 6.59 per cent return. Its average peer has made 4.49 per cent over this time while its S&P 500 benchmark is up 6.38 per cent.
Threadneedle American Extended Alpha is a long/short fund that typically holds around 150 to 200 individual stocks. The fund’s largest bet is on information technology with a net long allocation of 23.6 per cent, followed by healthcare, consumer discretionary and financials.
Another large fund that has had to cope with high outflows following a manager departure is Newton Asian Income. The fund is currently £2.3bn in size, which is a 53 per cent fall from its £5bn AUM held 12 months ago.
In May this year, former lead manager Jason Pidcock announced his exit from Newton Investment Management to join Jupiter and establish a new Asian income strategy there.
After this, the fund moved away from a lead and alternate manager structure to use a team-based approach overseen by Rob Marshall-Lee, investment leader of Newton’s emerging and Asian equity team.
Newton Asian Income’s AUM over 3yrs
Source: FE Analytics
Over the past 12 months, Newton Asian Income has turned in a bottom quartile 9.43 per cent loss while its average IA Asia Pacific ex Japan peer has fallen 5.93 per cent. Its long-term record remains strong, sitting in the first quartile over five years with a 23.26 per cent gain, but the management change did prompt several analysts to put the fund on review.
The new management team has made some changes to the portfolio, but is still similar to the one built by Pidcock with a significant chunk of assets in Australian equities and an underweight to China.