Star manager Richard Buxton’s move to a dual role as head of Old Mutual Global Investors as well as its flagship UK equity fund might pose an issue to the portfolio’s future performance, according to James Nield, investment manager at Thesis Asset Management
In a big shake-up Richard Buxton (pictured) has been appointed as chief executive of Old Mutual Global Investors [OMGI], the fund house where his UK Alpha fund is one of the most popular and highly regarded portfolios in the UK equity space.
Warren Tonkinson is to become managing director of OMGI following the changes with Buxton to continue to manage his popular fund, the group have said.
Investors are urged to keep a close eye on the fund’s they hold and to monitor any changes to the status quo, with it is a change in the underlying business or a change in the management team and Buxton’s popularity with both professional and private investors is all too clear to see.
Not only has the fund’s AUM jumped from £300m to £2.4bn since he moved to the group in May 2013, Old Mutual UK Alpha is also the most widely held IA UK All Companies portfolio among funds of funds managers as 42 of them count it as a top 10 holding, according to an FE Trustnet study conducted earlier this year.
Source: FE Analytics
Nield says Thesis are holders of the fund across several risk targeted portfolios having followed Buxton since his move from Schroders to Old Mutual two years ago.
“Moving from one big job to two big jobs might pose an issue for us but we have not internally taken a view on it yet,” he said.
Meera Hearnden, senior investment manager at Parmenion says the move is somewhat of a shock and throws up several questions regarding the dual roles of heading up the business and his fund.
“Richard Buxton is only two years into his role at OMGI so this move does seem rather sudden. He certainly has the knowledge on how to run a business, given that he has met hundreds of CEOs in his career and been at the other end asking challenging questions,” she said.
“He is no doubt well versed on the subject and can provide leadership as well as help grow the business. However, this is a global business with many threads to it.”
“Therefore, my concern is whether he can successfully run a business and manage his UK Alpha fund, so if I was an investor in the fund I’d be keeping a beady eye on performance. I appreciate he will be supported by Warren Tonkinson in his new role, but it does nevertheless mean additional responsibility which will no doubt prove challenging.”
Charles Stanley’s Rob Morgan agrees, but adds that there is a strong team on OMGI’s UK equity desk to support the fund’s processes.
“For me there are question marks as to whether he will be able to combine the two roles without affecting fund performance – though clearly it’s one of those things that can only be judged in retrospect,” Morgan said.
“On the plus side Old Mutual have an extremely strong and capable UK desk, so Mr Buxton has excellent resources at his disposal to assist him in running what is a well-honed strategy. As an investor you would rather he stuck to fund management, though. CEO could be a time-consuming role and he will need to be careful not to lose his focus.”
Anna O’Donoghue, head of research at Architas strikes a different note and says the investment style Buxton is known for lends itself to taking on a wider role within the business and that he did a similar job at Schroders.
“Buxton’s low turnover investment approach lends itself to taking on additional responsibilities; indeed while at Schroders the scope of his role extended beyond fund management. He has a strong team around him on the UK equity desk, and this role seems like a natural transition in his career development.”
Buxton has managed the £2.3.bn Old Mutual UK Alpha fund since December 2009, at first on a sub-advised basis during his time Schroders before joining Old Mutual Global Investors as head of UK equities in June 2013.
Since Buxton took over the fund in 2009 it has returned 86.47 outperformed the IA UK All Companies sector average 74.67 per cent while the FTSE All Share gained 60.6 per cent.
Performance of fund vs sector and index over manager tenure
Source: FE Analytics
The fund outperformed its average IA UK All Companies peers in 2012, 2013 and 2014 but has fallen into the fourth quartile this year with a 1.99 per cent gain. The sector is up 6.73 per cent, while the FTSE All Share has gained just 3.79 per cent.
Performance of fund vs sector and index in 2015
Source: FE Analytics
Old Mutual UK Alpha is one of the few funds that have managed to outperform with a bias to large-caps. Analysts say one of the reasons for its recent underperformance is due to an increased allocation to the mining sector.
Adrian Lowcock, head of investing at AXA Wealth, recently said to FE Trustnet: “Buxton has made some big calls with his fund such a switching into miners at the end of 2013, the fund benefited from a rebound in this sector in 2014 but a sustained recovery has yet to materialise and pressure has remained on mining stocks.”
Buxton has struck a more restrained tone on his expectations for UK equities this year compared to his bullish outlook in recent years.
Banks are Buxton’s biggest bet, with more than 12 per cent of his fund split between HSBC, Barclays and Lloyds. He also has another 12 per cent of his fund in other ‘financials’ such Legal & General, St James’s Place and Prudential.
Old Mutual UK Alpha has a clean ongoing charges figure (OCF) of 0.78 per cent.
