Fund Times 26 - 29 August

More Re-shuffling at Old Mutual Asset Management
Old Mutual Asset Management (OMAM) has re-hired Phil Hunter to temporarily manage the Old Mutual Asian Select fund. The fund’s current manager Suresh Sadasivan announced last June that he will be stepping down and leaving the firm. Hunter will be the interim manager and will then hand the baton to the new Head of Emerging Markets, once appointed. Hunter was a ten-year veteran at Old Mutual, working as an Asia Pacific equity analyst before leaving in May 2008 for an external portfolio management position.

Since its launch, the fund has experienced frequent manager turnover. Sadasivan was the last to step down and will have managed the fund for two years when he leaves next month. During his tenure, he has driven the fund to returns that are slightly better than its average Morningstar Asia Pacific Ex-Japan Equity category peer, but he also took investors for a bumpy ride (in absolute and relative terms) – the fund’s standard deviation has been significantly higher than its average peer’s during his tenure.

OMAM has witnessed high turnover in its staff this year, with departures spanning the global fixed-interest, Asian and quant teams, and most notably the firm’s Chief Investment Officer Eoin Murray.

Fund Trade Group Releases July 2008 Investment Fund Statistics
UK domiciled funds under management have dropped by 10% since July 2007 to total £414.3 billion according to the latest figures from the IMA. Conversely, overseas funds under management saw a 10% increase in value to £16.6 billion over the same period. Net sales of UK domiciled equity funds fell by £298 million, compared with a £195 million drop for fixed-income offerings in July 2008. Within equities, the IMA UK All Companies sector witnessed the highest share of gross sales, but also had the second highest net outflows, at £347 million, following the IMA Europe Ex-UK sector where net outflows clocked-in at £443 million. The IMA UK Absolute Return sector was the best selling sector overall for UK domiciled funds, with net inflows at £262 million. These statistics reflect investors’ sentiment on risk as they flee to the perceived safety of fixed-income investments and absolute-return vehicles. Whether that perception is warranted--particularly with absolute-return funds--remains to be seen. Although some have done well in the near-term, their methods remain opaque and the potential risks embedded in their portfolios are difficult to ascertain.

Long-Awaited IMA Fixed-Income Sector Changes a Step Away
The IMA will be changing its bond sectors on 1 September, splitting the existing UK Corporate Bond and UK Other Bond sectors into three new groups. The new sectors are Sterling High Yield Bond, Sterling Strategic Bond, and Sterling Corporate Bond. There has been some consternation over the new sectors, particularly the broad-ranging nature of Strategic Bond--but they help the local trade group catch up to more advanced classification systems, and remove the bucket group of "Other Bond".

New Star Sheds 44% in Operating Profits
New Star is sailing through a difficult 2008 as it suffered redemptions from its fund ranges to the tune of £1.1 billion, and a further £2.2 billion in losses owing to market decline in the first half of the year. This has translated to a 44% fall in operating profit during that period. New Star’s chairman John Duffield cited: “As expected, the first half of 2008 was a difficult period for New Star. The trading environment remains difficult and we do not expect conditions to improve in the immediate future”. You can read more about the interim results here.

A number of reshuffles have taken place within the firm’s investment teams in the last year. These include the merger of the UK Special Situations fund into UK Alpha and replacement of Mark Harris with Robert Jeffree on the Asia Portfolio in January, the appointment of Charles Deptford and Trevor Green in an effort to improve the performance of New Star Equity Income and New Star UK Growth and the addition of David Cornell to the emerging markets team in April. Also in April was the appointment of Hitesh Thakrar to replace Greg Kerr on the Global Equity fund. Then, in May the firm merged its poorly performing Japan and North American funds into New Star Pacific Growth and New Star American Portfolio, respectively. Also in May was the release of a proposal to introduce an incentivising share plan for key employees across the firm (read more on that here). In June, Trevor Green took over for Toby Thompson on the equity portion of New Star Managed Distribution, and in July Stephen Whittaker was replaced with Charles Deptford at the helm of New Star Equity Income. This month, the Tri-Star Unit Trust portfolio was merged into New Star Cautious Portfolio and New Star announced its change to a bid pricing basis for its International Property fund (a move detract shareholders from redeeming shares).

Henderson Replaces CEO and Plans to Re-domicile to Ireland
Henderson has announced that current CEO Roger Yates will step down on 4 November. Long-serving Andrew Formica, who is the firm’s current head of equities, will take over from Yates. Henderson has seen a drop in profits year-on-year and deflating assets under management following the market decline.

The firm also announced its plans to create a new parent company which will be tax-resident in Ireland. This is reflective of the difficulties in keeping the UK’s tax regime competitive with other locales. You can read more on this here.

Artemis to Add New Co-Manager on Special Situations
Ruth Keattch will join Artemis next month to work alongside Derek Stuart as co-manager on the Artemis UK Special Situations fund. Keattch joins with a wealth of experience as she was previously head of equities at Granville and senior investment manager at Ruffer Investment Management and Deutsche Asset Management. Her most recent appointment was at Troy Asset Management where she was a director and head of research. Keattch’s expertise in companies lower down the market-cap spectrum will be welcome, as Stuart plans to shift the fund’s focus back down towards smaller companies after having climbed up the market-cap ladder for the last two years. The fund’s performance compares favourably with its peers in the Morningstar UK Mid-Cap Equity category. Annualised returns have clocked-in at 11.2% over the last five years – giving the fund an annualised margin of +1.5 percentage points per year versus its average Morningstar peer.

Julius Baer Launches Local Emerging Market Bond in the UK
Julius Baer, the Swiss wealth manager, is making its Local Emerging Markets Bond fund available for sale to UK investors. The Luxembourg domiciled fund is designed to invest in emerging market bonds which are denominated or pegged to local currencies, spanning economies in Asia, Latin America, Europe, the Middle East and Africa. Currently, the fund’s major positions are in Mexico, Brazil, Columbia and Hungary. Managing the fund through Augustus Asset Management Limited are Paul McNamara and Caroline Gorman.

Launched in April 2000, the fund is currently being sold in Switzerland, Austria, Germany and the Netherlands, and held $1.82billion worth of assets in its coffers as of July 2008. The fund is a winner of Morningstar’s 2008 “Emerging Markets Bond” category award in Switzerland and Austria. Its performance has been strong over the last one, three and five years, residing in the category’s top-quartile over those periods and generating annualised returns to the tune of 9% over the last five years. However, the fund does exhibit high volatility which exceeds its average peer’s so investors have typically had to stomach a bumpy ride along the way. You can see what Morningstar's Sonya Morris had to say about the benefits and risks of emerging-market bond investing in her article, "Emerging Markets Bonds: Safe Haven or Suckers Bet?"

Premier Appoints New Manager on Dividend Fund
Premier Asset Management has poached Chris Wright from Thames River to replace Paul Branigan on Premier Dividend fund. Branigan will shift his focus to his current role as Chief Investment Officer, though he will also maintain management of Premier Absolute Growth. At Thames River, Wright’s focus was Pan-European stocks and derivatives. Previously, he worked on the sell-side at Collins Stewart and ABN Amro and managed the UK Equity portfolio of the BA Pension fund. The Dividend fund has been launched since 1985 and its long-term record is quite poor. In the last 10 years, the fund’s annualised returns were 1.9% and it lagged its average peer in the Morningstar UK Large-Cap Value Equity category by 1.46 percentage points each year.

More Changes at Baillie Gifford
At Baillie Gifford, Andrew Millington, manager of the Baillie Gifford Income fund, has been replaced with Patrick Edwardson. Millington will be leaving the firm having worked there for four years. Edwardson is a Partner in the firm and a long-serving member of Baillie Gifford’s investment team. He is a senior member of the UK equity team and worked closely with Millington in the last year. The fund has struggled in the last three years relative to its peers Morningstar UK Large-Cap Value Equity category, and also in absolute terms – the fund shed 0.8% of its value each year on an annualised basis compared with a gain of 1.9% for its average category rival.