Fund manager changes can be tricky for investors to navigate, but can also provide fruitful for those willing to give the new manager time to work.
While some recommend sticking with a fund until the new style and investment scheme of the new manager has been enforced, many investors can be put off by change, moving money out before giving the new manager time to settle in for funds with a proven track record.
Below FE Trustnet looks at how the fund managers that came into their three, four or five year performance period in the first half of this year have got on since taking over their new funds.
Fidelity Special Situations
The largest and most high-profile manager change occurred in the £3.1bn Fidelity Special Situations fund, with FE Alpha Manager Alex Wright taking over in January 2014.
The fund was previously run by Sanjeev Shah from January 2008, who in turn had taken over the flagship fund from veteran fund manager Anthony Bolton.During his tenure, Shah returned 60.79 per cent to investors – placing the fund in the second quartile of the IA UK All Companies sector over the period – and comfortably ahead of the FTSE All Share’s returns of 36.75 per cent.
Shah left the fund after six years in charge to take up a behind-the-scenes role training new fund managers.
The fund was taken over by the up-and-coming Alex Wright, who had been running the Fidelity UK Smaller Companies and Fidelity Special Values funds, who co-managed the fund with Shah briefly before taking sole management in January 2014.
Since taking over management of the fund, the four crown-rated Fidelity Special Situations has returned 40 per cent to the end of May, as the below shows.
Performance of fund vs sector and benchmark since manager start
Source: FE Analytics figures to the end of May 2017
This return places it in the top quartile over the period, beating the All Companies sector by 11.45 percentage points and the FTSE All Share by 1.98 percentage points.
In its latest factsheet, Square Mile Research said: “Although Wright has been in the industry since 2001 and managing assets since 2008 he is still fairly new to this fund, though clearly not the investment style.
“This fund is an interesting proposition run by a new, highly motivated and passionate investor, who has already generated some acclaim through his running of a smaller fund.
“The Special Situations fund is a flagship fund for Fidelity and Mr Wright's appointment to such a high profile strategy so early in his career reflects Fidelity's views on his capabilities.”
The fund has a clean ongoing charges figure (OCF) of 0.94 per cent.
Invesco Perpetual UK Focus
Another fund manager getting off to a fast start is FE Alpha Manager Martin Walker, manager of the £201m Invesco Perpetual UK Focus, who took over the fund at the end of 2012.
He took over the fund – named Invesco Perpetual UK Aggressive at the time – after previous fund manager Stephen Anness moved to take over the Global Opportunities fund.Over Anness’ tenure, the fund returned 33.36 per cent versus a 21.58 and 18.3 per cent return for the FTSE All Share and IA UK All Companies sector respectively.
Walker had been running Invesco Perpetual UK Growth fund, as well as the Invesco Perpetual Childrens fund, which he stepped back from in 2016.
At the time, Nick Mustoe, chief investment officer at Invesco, said: “Giving Martin Walker management of both the Invesco Perpetual UK Growth fund and the Invesco Perpetual UK Aggressive fund is a logical move that will give one of our most experienced UK managers the chance to express his high conviction ideas in a more concentrated portfolio.”
Since he took over, Walker has continued the fund’s strong performance, returning 98.17 per cent since he started, 40.76 and 33.83 percentage points ahead of the benchmark and sector respectively.
Performance of fund vs sector and benchmark since manager start
Source: FE Analytics figures to the end of May 2017
Currently the fund is overweight financials (33.39 per cent) and has a high allocation to the oil & gas sector (19.04 per cent).
In its latest factsheet, the manager said he has “taken advantage of what he views as irrational pricing scenarios, while maintaining a long-term investment approach”.
“The fund’s largest sector exposure continues to be to integrated oils, in part a reflection of the fund manager’s view on the oil price,” the manager added.
“Despite the challenging regulatory outlook for UK banks, the fund manager maintains the view that these businesses are better capitalised than at any point since the financial crisis.”
The fund has a yield of 2.39 per cent and an OCF of 0.92 per cent.
L&G UK Special Situations
The final eligible manager making a strong start in a new fund is L&G Investment Management’s Richard Penny, who took over the £268m L&G UK Special Situations fund in May 2014.
Penny took over from Guy Rushton, who managed the fund for one year before leaving when his L&G UK Absolute fund was wound up in May 2014.Rushton was also managing L&G UK Active Opportunities (taken over by Penny) which has since closed and joined Polar Capital in August of the same year to run the Polar Capital UK Absolute Equity fund.
In the year that Rushton managed the fund, he retuned 20 per cent, placing it in the top quartile of the IA UK All Companies sector.
Since Penny took over, the fund has continued to be a top quartile performer, returning 44.99 per cent – above both the FTSE All Share and UK All Companies sector.
Performance of fund vs sector and benchmark since manager start
Source: FE Analytics figures to the end of May 2017
Penny has become the second longest-serving manager of the fund behind Matt Fletcher who ran it from 2008 to 2013 before Robert Churchlow took interim charge for one month.
Penny defines special situations as those companies that are undervalued, mispriced or unloved hat look ready for a rebound through scenarios such as refinancing, mergers & acquisitions (M&A), secular growth or event driven changes.
The manager looks further down the market cap spectrum, with more than a third of the fund invested in companies with a market cap of £3bn or less.
The fund has a yield of 1.5 per cent and an OCF of 0.94 per cent.