Star fund managers — whether fallen to earth or rising high — dominated the investment landscape this month.
The ongoing problems at Woodford Equity Income fund continued to make headlines, with the fund’s administrators confirming analysts’ predictions that investors are unlikely to be able to access their money before December.
The fallout from this debacle has caused ripples across the investment industry. Hargreaves Lansdown — widely criticised for continuing to promote this fund to investors, despite continued poor performance — has clearly been taking a closer look at other funds on its influential Wealth 50 recommendation list.
It has now removed a number of Lindsell Trains funds, citing a potential conflict of interest as they hold a significant investment in Hargreaves Lansdown shares. These funds, run by star manager Nick Train, have delivered outstanding returns for investors in recent years.
Another manager who has built an impressive track record, Alexander Darwall, has announced he will set up his own boutique investment firm after stepping down from his role as European fund manager at Jupiter. This has drawn obvious comparisons with Neil Woodford, who formed his own company after 20-year plus track record with Invesco Perpetual.
However, Darwall will initially focus on investment trusts, rather than open-ended funds, which analysts say are unlikely to run into the liquidity problems which have beset Woodford Equity Income.
Elsewhere, Neptune Investment Management, known for its highly active approach and founded by Robin Geffen — another stock picker with a formidable reputation — has been bought by Liontrust Asset Management.
Liontrust Snaps Up Rival Fund Manager
Liontrust Asset Management is to buy rival fund manager Neptune Investment Management in a deal worth up to £40 million.
Investors in Neptune funds are unlikely to see any immediate change though, as the fund management team will move across to Liontrust.
Robin Geffen, Neptune’s founder will step down as chief executive when the deal completes in October, and will focus instead on leading the investment team and managing his own funds.
Announcing details of the acquisition, Liontrut said this would broaden its fund range, with many of the Neptune funds being it areas not covered by its eight fund management teams. For example it has a number of funds in emerging markets including the four-star rated Neptune Russia, a five star rated Neptune Global Technology the three-star rated Neptune Global Alpha.
Liontrust added that Neptune has a strong record of delivering returns for investors, with 19 of its funds in the top quartile of their respective Investment Association sectors.
Jupiter Star Launches New Firm
Alexander Darwall, who has built a formidable reputation running Jupiter’s £5.5bn European fund is to launch his own investment management business, Devon Equity Management.
Jupiter’s head of investment trusts Richard Pavry and Luca Emo, a manager on Jupiter’s European funds, will also join this new enterprise.
Initially this group will only offer investment trusts. This could include the Jupiter European Opportunities investment trust (JEO) that Darwall has managed for the past 20 years.
Analysts at Numis Securities said they expected the board to stick with Darwall and transfer the mandate from Jupiter to Devon Equity Management.
In a statement Jupiter said that Darwall had agreed not to compete in the UCITS market for a period of two years.
However if Jupiter does lose the JEO investment trust this will seriously reduce its investment trusts holdings, with net assets under management fall from £1.34bn to just £345m.
Darwall had previously announced he was stepping down from this role at the start of July. Mark Nichols took over the management of Jupiter’s European fund from the start of this month.
Woodford Equity Income Closed Until December
Investors in the Woodford Equity Income Fund are unlikely to be able to withdraw their funds until December.
Neil Woodford’s flagship fund initially closed at the start of June, effectively barring withdrawals for a month. The administrator Link Asset Services has now said it will likely be a further four months before this fund will reopen.
The fund is now worth around £3.5bn, significantly below its £10bn peak.
In a statement to investors Woodford apologised for the “inconvenience and anxiety” caused by the fund’s suspension, but confirmed that the fund management group would continue to deduct fees, while the managers try to rebalance the fund away from smaller unlisted equities into larger FTSE 100 companies.
Shortly after this announcement it emerged that the fund has once again broken rules limiting the amount of unquoted stocks that can be held. Currently this is set at a 10% limit, but this was breached after two holdings de-listed from their stock markets. There have been concerns that this limit was breached on a number of occasions before its suspension.
Woodford described this as “an inadvertent passive breach”. The firm added: “The FCA’s guidelines as for all UCITS limits is that funds should be brought back into compliance following an inadvertent passive breach in a manner that is in the clients’ best interests and within six months of the date of discovering the relevant breach.”
M&G Launches New Emerging Market Bond Fund
M&G Investments has launched a new emerging market bond fund which will have a focus on environmental, social and governance (ESG) issues. This fund will be managed by Charles de Quinsonas, who also manages a range of other emerging market bond funds for M&G.
The fund manager said that ESG analysis is becoming “an important complement to traditional financial analysis” when assessing potential holdings.
M&G’s head of fixed interest for mutual fund Jim Leaviss said that while the number of ESG-related strategies has increased in recent years “emerging market corporate bonds remain an under-served part of the ESG landscape”.
The fund will be a Luxembourg-based SICAV. It will invest at least 80% of its assets in debt securities issues by emerging market companies and predominantly invest in US dollar-denominated bonds, but will offer a hedged share class.
Hargreaves Removes Lindsell Train Recommendation
Hargreaves Lansdown has removed a number of highly-rated Lindsell Train funds from its influential “Wealth 50” recommendation list.
This includes both the gold-star rates Lindsell Train UK Equity and the silver-rated Global Equity Fund. Both have a five-star rating from Morningstar, reflecting their strong outperformance in recent years.
The removal from this list is due to the fact that both funds invest in Hargreaves Lansdown shares, rather than any concerns over future investment performance.
Hargreaves Lansdown chief investment officer Lee Gardhouse says: “Given the continued popularity of the funds we anticipate the investment in Hargreaves Lansdown shares could grow further and we are therefore removing them from our favourite funds list in line with our procedures."
