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Jan Luthman retires: What should investors do with his Liontrust funds?

01 September 2016

The UK equity manager has retired so we ask the experts how this affects the outlook for his Liontrust Macro Equity Income and Liontrust Macro UK Growth funds.

By Gary Jackson,

Editor, FE Trustnet

The retirement of Liontrust’s UK equity veteran Jan Luthman should not lead investors to automatically drop the funds he co-manages, fund pickers have said, although they may want to pay attention to how well the strategies do without his three decades of experience.

Liontrust Asset Management yesterday announced that the FE Alpha Manager, who co-manages the £543.9m Liontrust Macro Equity Income and £53.9m Liontrust Macro UK Growth funds, had retired from fund management at the end of August.

Luthman had an investment career spanning almost 30 years, with 14 of them spent managing money. He joined Liontrust in April 2012 after the company acquired Walker Crips Asset Managers.

Liontrust Macro Equity Income and Liontrust Macro UK Growth will now be managed by fellow FE Alpha Manager Stephen Bailey, who has run the portfolios with Luthman since launch, and Jamie Clark, who has been managing money with Luthman and Bailey since September 2003. There will be no changes to the Macro Thematic investment process used on the funds.

John Ions, chief executive of Liontrust Asset Management, said: “We would like to thank Jan for his contribution to the team and we wish him all the very best in his retirement.”

“Stephen and Jamie will continue to manage the funds in exactly the same way as they have always done using the Macro Thematic investment process, which provides continuity and consistency for our clients and investors.”

Performance of Liontrust Macro Equity Income vs sector and index since launch

 

Source: FE Analytics

As the chart above shows, Liontrust Macro Equity Income’s 235.28 per cent total return since launch in October 2003 represents significant outperformance of both its average peer in the IA UK Equity Income sector and its FTSE All Share benchmark. Indeed, it is ranked fourth out of 34 funds over this time frame.

Liontrust Macro UK Growth has made 281.61 per cent since its launch in August 2002 and is in the top quartile of the IA UK All Companies sector, where the average return has been 195.35 per cent. It has also beaten the FTSE All Share’s 210.25 per cent total return during this period.


The investment process developed by Luthman and Bailey revolves around the view that macro thematic analysis – or the identification and interpretation of major economic, political and social developments affecting the UK and the rest of the world – offers more potential to add long-term investment value than stock specific analysis.

The managers spend a great deal of time analysing a “highly eclectic” range of information sources (they have more than 100 core media sources that they believe meet their criteria of delivering asymmetric information) that can offer them greater understanding of potential investment themes. However, they avoid putting too much emphasis on information sources that are widely used by the investment community – such as paid-for research – as this is likely to be already reflected in asset prices.

One result of this approach is that Liontrust Macro Equity Income does not hold many of the popular income-producing UK stocks that are the mainstay of the typical UK Equity Income fund.

Top 10 holdings in Liontrust Macro Equity Income

 

Source: FE Analytics

Richard Troue, head of investment analysis at Hargreaves Lansdown, says that the departure of such a prominent member of the team should prompt investors to monitor the fund more closely, although he does not see a strong reason to sell immediately.

“It is certainly disappointing to lose Jan Luthman and his 30 years’ experience. His views on the wider economic, political and social environment shaped where the fund was invested and added considerable value for investors over the long term,” he said.

“An ability to astutely read the wider economic environment is a tough skill to teach and I would view the team as weaker without Jan’s input, even though Stephen Bailey and Jamie Clark have worked with him for a long time.”

“I tend to be against rash decisions in these situations and given that, at present, I don’t expect any wholesale changes to the process some investors might like to give Stephen Bailey and Jamie Clark the chance to prove themselves.”

Jason Hollands, managing director of business development and communications at Tilney Bestinvest, adds that it is difficult to take a view on how the funds will perform without Luthman as he and Bailey “have been joined at the hip for so long”. The two started working together in 2000 when Luthman joined Walker Crips.


“But the funds have a clear investment process and given half of the duo remains in situ and this will likely have been anticipated for some time, fans of the approach should probably stick with it,” Hollands continued.

“That said, these aren’t funds we use and performance has struggled over the last year. It’s been a tough environment for managers who start with a ‘macro’ view to get right given factors such as the surprising gyrations in commodities, the outcome of the referendum and dithering by the Fed.”

Performance of fund vs sector and benchmark over 1yr

 

Source: FE Analytics

Liontrust Macro Equity Income and Liontrust Macro UK Growth have both fallen into the bottom quartile over the past 12 months. The above chart shows the performance of the former, while the IA UK All Companies fund has made a 2.73 per cent loss, compared with a 9.23 per cent gain from its average peer.

Other fund pickers argue that investors should look beyond these short-term numbers, noting that the funds’ very strong long-term track records were built under the leadership of two managers – one of whom remains very much in place on the fund.

Darius McDermott, managing director at Chelsea Financial Services said: “Jan was an integral part of the team, particularly on the macro side. That said Stephen was more of the stock picker. We retain confidence in their funds but will keep an eye on them. We know Stephen very well and his long-term track record is very good, even if the short-term numbers are less than stunning.”

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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.