The summer Budget, political and financial turmoil in Greece, ongoing problems with the Chinese markets, plus gold hitting a five-year low has meant there has been no summer lull in the fund management industry.
Below we take a look at the significant changes and moves that have occurred in the sector this month:
Emerging Market Fund Manager Departure
Mark Mobius, the veteran emerging markets manager, announced he is stepping down from his role as lead fund manager of the Templeton Investment Trust (TEM). From October 1 he will hand over control of this £1.6 billion fund to his colleague, Carlos Hardenberg.
Mobius has run this trust since 1989 - when it was one of the first emerging market funds in the UK. But the 78 year-old manager is not retiring just yet; he will remain on the portfolio management team of the trust.
Over the longer term this trust has outperformed the emerging markets MCSI index. But over the past four years, its performance has struggled. The last 12 months have been a particularly difficult period - and it now trades at a discount of more than 10%. It remains to be seen whether this change will help revive its fortunes.
This wasn’t the only manager move this month: Giles Parkinson, the assistance manager of Artemis Strategic Assets left, and was replaced by Kartik Kumar. The fund is still run by lead manager, William Littlewood.
Commercial Property Fund Doors Close
Aviva was in the news, limiting withdrawals on two of its commercial property funds.
Aviva has suspended all trading on its Asia Pacific Property fund after two of its biggest investors, who between them owned around 75% of the assets, tried to redeem their holdings.
Investors now face a two year wait to get their money, while Aviva attempts to sell the underlying assets for the best price - bringing back unwelcome memories of the 2008 commercial property crash, when fund managers pulled down the shutters on the majority of commercial property funds.
This move comes just a week after the the company increased the exit fees on its £2 billion Aviva Property Trust. After the fund manager left in May this led to an increased number of withdrawals, so now Aviva has switched from a ‘bid’ to ‘offer’ price for those exiting the fund. Analysts said this change means sellers will now get around 5.6% less for their holding than they would have done under the previous pricing structure.
Income Funds Shake-Up
There was renewed controversy over the way the Investment Association (IA) classifies its sectors, after Schroder Income became the latest equity income fund to be jettisoned from the equity income sector.
Until it lost its place in this sector, this fund was a top quartile perfumer over three years.
IA rules require an equity income fund to have a deliver a yield equivalent to at least 110% of the FTSE All-Share index, over a rolling three-year period.
But Schroder argues that this calculation restricts the ability of managers to hunt out income opportunities in the market Currently the FTSE All share is yield of 3.4% is skewed by around 30 large cap companies that yield over 5%. Therefore equity income funds tend to have very large stakes in just a small number of companies.
Schroder is now in discussion with the IA to see whether these calculations need to be changed for the future. Schroder has suggested moving to a median market yield. On this basis the FTSE All Share currently yields 2.4%, while Schroder Income yields 3.6%.
Fund Mergers
Following manager changes earlier this year, Jupiter Undervalued Assets – worth £123 million – was merged with the larger £1.5 billion Jupiter UK Growth fund.
Both funds were being managed by Steve Davies; who had run the Undervalued Assets since 2012; and the UK Growth Fund since May 1 this year.
Both funds already adopted a similar investment approach and had similar portfolios. The merged fund – which will keep the Jupiter UK Growth name – will now predominately invest in UK equities, although there will be limited international exposure.
VCT Changes
Finally there have been a number of changes to VCTs, following the summer Budget. The announcements effectively limit the companies VCTs can invest in; in most cases to business that are no more than seven years old.
Previously, some VCTs had backed long-established companies which were in the process of a management team buyout, where they had sought funding from VCT providers.
This change means VCTs have to become more focused on early phase companies. This will present a serious challenge to managers, and will also limit the potential universe of deals.
Some VCTs have begun returning cash to shareholders – and others are expected to follow suit.
Partly because of these changes Northern VCT (NTV) announced they were stopping their Dividend Reinvestment Scheme.
