The announcement of Jim Stride’s retirement from running the £890m AXA Distribution should be no cause for alarm, according to several investment professionals, although some believe it presents an opportunity for existing holders to review their position and whether it remains appropriate.
Stride’s retirement was announced on Monday, which will see the manager step down from managing AXA Distribution after more than thirty years at its helm. Jamie Forbes-Wilson and Matthew Huddart will instead co-manage the fund, both of whom have been listed co-managers on the fund alongside Stride since February 2016.
Since the turn of the millennium, the fund – which aims to achieve consistent long-term returns through a multi-asset portfolio – has outperformed its average peer by 28.59 percentage points with a total return of 134.18 per cent.
Performance of fund vs sector since 2000
Source: FE Analytics
Given that it has a cautious approach to investing and focuses on minimising fund volatility, it also has a maximum drawdown (which measures the most money lost if bought and sold at the worst possible time frame) of just 21.86 per cent. While this is broadly in-line with its average peer, it is almost half the drawdown an investor would have experienced had they decided to stick with equities and buy into the FTSE All Share index over this time instead.
Given Stride’s lengthy track record steering the fund through several market cycles, how should investors react to the news of his retirement?
Ryan Hughes, head of fund selection at AJ Bell, said Jamie Forbes-Wilson has been at AXA Framlington for a long time and, as such, is highly likely to provide continuity in his approach to taking over the fund.
“Investors should be reassured that they are unlikely to see wholesale changes to the investment philosophy and process,” he reasoned. “That said, it would seem opportune for existing holders to review their position and ensure that it remains appropriate for their objectives.
“Given the anticipated continuity it would seem appropriate for investors to be patient and take the time to assess if there is likely to be any material change to the approach.”
Hughes said this patience should also stretch to those looking at the fund today as a potential new investor in order to assess whether there will be any changes to its approach.
“While this is unlikely, there is always the possibility that the new manager will want to make their mark on the portfolio which could lead to some potential short term repositioning,” he added.
For those looking for an alternative, the head of fund selection said Newton Real Return could present itself as a good option.
The £10.2bn fund, which has been managed by Iain Stewart since 2004, has returned 65.48 per cent over the last decade and has done so with a maximum drawdown of 11.96 per cent.
While it has marginally underperformed its LIBOR plus 4 per cent benchmark over this time frame, Hughes pointed out that it has generated yield for a long period and currently yields more than the AXA Distribution fund at 2.4 per cent.
Performance of fund vs benchmark over 10yrs
Source: FE Analytics
Ben Willis, head of research at Whitechurch Securities, said Stride’s departure will mean little to those currently holding the fund.
“This is not to disparage the sterling work that Stride has managed over all of his years, but the Distribution fund has many guises – across many mandates and investment wrappers,” he explained. “It is an integral fund for AXA and has been for many, many years.
“As such, the team and resource behind will not change. Although Stride is retiring, I’m sure that this was well planned in advance and AXA will have ensured that succession planning is in place.”
Willis said it is unlikely that many current investors will become nervous now that Stride has retired. However, he said two alternatives stand out in the form of Artemis Monthly Distribution and Invesco Perpetual Distribution.
“Both of these funds will generally hold higher risk bonds than the AXA fund, which has tended towards holding a blend of UK government bonds and UK equities,” the head of research continued.
“Investors could also opt for the passive approach and use a UK gilt tracker and an UK equity income tracker if they are conscious of costs.”
Jason Hollands, managing director of Tilney Group, agreed that investors have no need to be concerned over Stride’s retirement.
“This fund is a solid old-school balanced equity and bond fund, that does not aggressively change its asset allocation across the cycle and invests in a core UK stocks and bonds, with blue-chip equities as the dominant sub-portfolio,” he pointed out.
“AXA are a well-resourced business with good track records in both UK equities and bonds, and there has been a clear succession plan in place over the last year with Jamie-Forbes Wilson appointed co-manager in early 2016.
“Jim Stride has long been one of the biggest beasts in the balanced fund world and a major player in the index linked gilts market, which makes up a big chunk of this fund. Unlike most in the fund management industry who hop around jobs every few years he has remained in situ for an incredibly long time.”
Hollands said one reason investors might consider a switch, however, would be to take a slightly different approach such as buying into a more global rather than UK-focused strategy.
An attractive example of this, according to the managing director, would be Jacob de Tusch-Lec and James Foster’s Artemis Monthly Distribution fund, which has five FE crowns and is £467m in size.
Since its launch in 2012, it has returned 95.15 per cent compared to its average peer’s return of 44.44 per cent.
Performance of fund vs sector since launch
Source: FE Analytics
Martin Bamford, managing director of Informed Choice, used to recommend AXA Distribution before starting to use single asset class funds for varying risk levels.
He said: “It has always been a solid distribution fund; I would describe Jim and his team at AXA as a safe pair of hands for income investors.
“For investors who currently hold this fund, Jim’s well-earned retirement is no cause for alarm. His co-managers Jamie Forbes-Wilson and Matthew Huddart will take over his responsibilities when he steps down at the end of the month.
“For investors who were considering an investment in AXA Distribution, there is no harm in reviewing the market and confirming the choice before an investment is made. Investors should be buying into the fund and its process, rather than the manager himself. There are still a few star fund managers out there but identifying one before investing is becoming increasingly difficult.”
For cautious investors looking at distribution-type funds, Bamford said Jupiter Merlin Income Portfolio is another option to consider.
“This is a multi-asset fund of funds, which has delivered a consistently good performance over the years and is managed on a team basis,” he added.