FE data shows Schroder UK Opportunities has lost 3.43 per cent since Dean’s resignation, meaning that total outflows are in excess of £600m over the period.
The fund is now less than half as large as it was back in February this year, with much of the fall coming in the past month. This puts current AUM at £1.35bn, falling from a peak of £2.84bn.
Size of fund since Oct 2011
Source: FE Analytics
Stellar performance since the financial crisis and the growing reputation of Dean led to a raft of inflows into the fund throughout 2012 and 2013, sending total AUM from £167m in October 2011 to over £2.8bn in February 2014.
Schroder UK Opps was a top quartile performer in the IMA UK All Companies sector every year between 2008 and 2013.
Performance has been poor this year, however, with the fund struggling to protect against the downside since markets took a turn in March. FE data shows that the fund is a bottom decile performer in the IMA UK All Companies sector in 2014, with losses of 11.51 per cent.
Performance of fund, sector and index in 2014
Source: FE Analytics
Matt Hudson (pictured), manager of the five-crown rated Schroder UK Alpha Income fund, has taken over from Dean as lead manager.
He told FE Trustnet last week at the FE Select 100 UK Equity Income event that he has no reservations in taking over the growth focused fund.
Schroders declined to comment on the redemptions.
Outflows were already significant prior to Dean’s departure – more than £500m in the six months to 1 September according to FE data, but the last few weeks has been especially brutal.
As well as Dean’s resignation, and most likely some profit taking, the rapid growth of the fund’s size had concerned some investors, prompting a portion of the outflows prior to 8 September.
Dean’s business cycle approach requires a relatively high level of turnover, which can be compromised when funds receive high levels of inflows.
IBOSS investment director Chris Metcalfe told FE Trustnet earlier this year that he was selling out of Schroder UK Opps for exactly that reason – a move that has proved to be very well timed.
Fund of funds manager at Thesis Steven Richards points out that Hudson’s UK Alpha Income fund hasn’t suffered nearly as much as UK Opps this year, in spite of using a similar business cycle approach.
FE data shows that the income-focused fund has slipped behind the FTSE All Share this year, but is only down 2.57 per cent.
Dean told FE Trustnet in June this year that the reason for her underperformance was down to stock specific issues and portfolio positioning rather than the mass inflows.
Chase de Vere’s Patrick Connolly recently defended the performance of the fund, pointing out that funds run with a business cycle approach are often susceptible to steep periods of short-term underperformance.
However Ian Rees, manager of the £413m Premier Multi Asset Distribution fund, thinks that in many cases stock specific issues arise because of the mass inflows – not in spite of them.
“I think stock issues and fund size can be interlinked. When a fund gets too big, the ability of the manager to fully express their views is diminished,” he explained.
“This can mean that when a stock looks more troubled or too richly valued, a longer term mindset has to prevail. The fund manager then falls back on 'running long-term winners' as a positive style trait.”
When Dean was working at Cazenove before it was acquired by Schroders, it was announced that the fund was approaching capacity, prompting then head of investment Robin Minter-Kemp to deter future inflows.
While both Cazenove and then Schroders stopped marketing the fund, it remained – and still remains – open to new money across all major platforms.
UK Opps isn’t the only Schroders fund that has had a tough time of it from both a performance and outflows point of view.
FE Alpha Manager Paul Marriage’s Schroder UK Dynamic Smaller Companies fund is a bottom decile performer this year, with losses close to 10 per cent. Again, performance started to take a turn for the worst in March.
Performance of fund, sector and index in 2014
Source: FE Analytics
The steep losses combined with significant outflows for the fund has seen total AUM fall from a peak of £1.32bn in January 2014 to £726m at time of writing.
FE data shows that in the six months to the beginning of September, the four-crown rated fund has suffered outflows of just over £350m.
Schroders decided to close the fund to both new and existing investors in November last year, again following years of stellar performance.
In spite of the recent difficult period, Schroder UK Dynamic Smaller Companies is a top-decile performer in the IMA UK Smaller Companies over a five-year period with returns of 157.49 per cent. It’s also ahead of its sector and benchmark over three years.
However, for some the move came too late.
Premier’s Simon Evan-Cook told FE Trustnet in February that worries over AUM contributed to his decision to sell out of Marriage.
However, he also said expensive valuations played a part, and it must be assumed that a significant portion of the outflow from the fund is as a direct result of profit taking.
Size of fund since Oct 2011
Source: FE Analytics
“We had owned Cazenove UK Smaller Companies, but we have sold out of it now because it is too big for us.”
“There is also the valuation concern as well, so it is a combination of the two,” he said.
Again, Schroders declined to comment on the redemptions.
While there have been concerns over size, it must be stressed that Marriage's bottom-up style is susceptible to short bursts of underperformance. The fund fell short of its peers in 2008 for example, losing 42.51 per cent over the 12 month period.
