Investors in Richard Buxton’s Old Mutual UK Alpha fund should consider selling out if performance wanes in the next few months owing to the manager’s new role as chief executive of Old Mutual Global Investors, says Hargreaves Lansdown head of research Mark Dampier, who adds that while there are few funds to effectively replace Buxton’s he is considering one in particular.
Last week, in what was something of a big shake-up for this time of year, it was announced that Buxton (pictured), manager of the £2.4bn Old Mutual UK Alpha fund, has been appointed as chief executive of Old Mutual Global Investors (OMGI), the fund house where he moved just two years ago after a long spell at Schroders.
Buxton is one of the most popular and highly regarded managers in the UK equity space and, barring trackers funds, his fund has seen the most cash – £500m – flow in over the past year in the IA UK All Companies sector.
But a number of discretionary fund managers told FE Trustnet last week that the news raises a number of concerns over the future of the fund.
Dampier (pictured below), the highest profile name yet to venture into the debate over the dual role, says while he is a big fan of Buxton he is concerned that the two jobs will not gel easily together and is therefore considering switching UK exposure to Steve Davies’ £1.5bn Jupiter UK Growth fund.
“We haven't decided quite what we'll do yet. We have spoken to him and I get the point that 'I am well supported and can do both jobs' but I am not sure I believe it at all,” he said.
“At the moment I just cannot view it as being totally positive. It some ways it is still too early to say anything but it is hard to say anything positive either, that is the real point,” he added.
“I'm not being negative deliberately but I find it hard to put a positive spin on it. It may be easy for them to do it but the history of fund managers also being CEOs has showed you cannot do these two roles easily.”
Warren Tonkinson is to become managing director of OMGI following the changes with Buxton to continue to manage his fund and Tonkinson taking care of more day-today concerns, the group has said.
Dampier said: “They [Old Mutual] are bound to say he can do both jobs and he [Buxton] is bound to say that he doesn't have to do much of the CEO job, but I just do not see fund managers doing joint roles very well.”
“It does not matter how much they say this, right now you have more things to deal with on the chief executive side and if it not much of a job then why bother in the first place?”
He adds that while he is being vigilant on Buxton’s performance in the coming months, there are several question marks over what he will buy should there be a drop in performance but he thinks Davies’ fund is the best fit.
“It is really not bleeding obvious what you would buy. It is quite tough and we will have to see what he does over the next few months and we are still cogitating on what we might do or not do,” Dampier said.
“Richard has very much made it his own type of fund. It hasn't had a great time over the past 18 months or so but a lot of the blue chips and general FTSE 350 have not either.”
“The thing is with this fund, is it is hard to replicate it with another fund but a UK growth fund such as Steve Davies is one.”
Davies has been at the helm of Jupiter UK Growth since the start of 2013, since when it has stayed consistently ahead of the sector and the FTSE All Share and almost doubled the index’s gain.
He has a value style, similar to Buxton, but noticeably takes more specific sector bets and has a more concentrated portfolio. However, overall they both have 30 per cent in financials.
Performance of funds, sector and index over 3yrs
Source: FE Analytics
Davies had previously managed the Jupiter Undervalued Assets fund since 2012 but this merged with the growth fund last month.
One of Davies biggest bets is banks, which he believes will bounce back robustly in the coming years after being battered in the financial crisis era. He has Lloyds as his largest position at 7.44 per cent and also holds Barclays and RBS in his top 10.
“It is the one clear value opportunity left in the UK stock market. Back in 2012 there were lots of stocks that you could think you will make 50 to 100 per cent on a two-year time horizon but most of these have gone,” he told FE Trustnet a few months ago.
“The UK banks look very appealing and we have had very good news coming out of them in the last few weeks. The good bits of the banks – the retail side – are getting better.”
Buxton has managed the Old Mutual UK Alpha fund since December 2009, at first on a sub-advised basis while at Schroders before joining Old Mutual Global Investors as head of UK equities in June 2013.
Since he took over the fund in 2009 it has returned 85.77 per cent, outperforming the IA UK All Companies sector average of 75.05 per cent and the FTSE All Share’s 61.2 per cent gain.
Performance of fund vs sector and index since 2009
Source: FE Analytics
The fund outperformed its average IA UK All Companies peer in 2012, 2013 and 2014 but has fallen into the fourth quartile this year.
Jupiter UK Growth has an ongoing charges figure of 1.03 per cent. Old Mutual UK Alpha is cheaper at 0.85 per cent.
