Fund Times: 8 - 12 June
BlackRock to buy Barclays Global Investors for $13.5 billion; Artemis to merge the New Enterprises Fund; T. Rowe Price plans launch of Absolute Return Bond strategy; Julius Baer Asset Management plans fund range rationalisation
BlackRock to buy Barclays Global Investors for $13.5 billion.
BlackRock will become the world's largest money manager after its purchase of Barclays’ investment unit for $13.5 billion in a combined equity and cash deal to be completed later this year. This will leave BlackRock overseeing more assets than the US Federal Reserve. The Barclays unit being purchased includes the range of low cost index trackers, iShares, making BlackRock the first large firm to offer both active and passive management styles on a large scale. Private equity firm CVC partners, that had previously agreed to buy Barclays’ iShares, will have five days to match BlackRock’s offer or receive a break fee. It is unlikely to be able to match this offer in current market conditions with banks reluctant to fund leveraged buyouts.
Artemis to merge the New Enterprises Fund
Artemis plans to merge its £26 million New Enterprises fund into its UK Special Situations fund, subject to shareholder and regulatory approval. The 8 year old New Enterprises fund, managed by Lindsay Whitelaw and Andy Gray, focuses on investment in the technology and telecommunications sector. The rationale behind the merger is waning investor interest in the sector, combined with the fund’s British bias which leads to limited investment opportunities. Derek Stuart’s much larger UK Special Situations fund has some holdings overlap with this fund, leading to the decision for this merger.
While very small funds can be very expensive and unviable, investors now face the prospect of finding themselves holding a fund with a completely different mandate to the one they were invested in. While some holdings might overlap, the purpose of both funds is very different. Artemis believes that the UK Special Situations fund is a better diversification play, however we feel that investors were unlikely to be in a specialist technology fund if they were looking for this diversification. From the investor's point of view, there's no particular reason to stay with Artemis--there is a large number of technology funds available from other firms. You can see a list of ones available to UK investors here. On the positive side, the TER of the combined offering will be much lower than that of the current New Enterprises offering.
T. Rowe Price plans launch of Absolute Return Bond strategy
US based asset manager T. Rowe Price plans to launch a global fixed income strategy later this year. It will be run out of London by Ian Kelson, T Rowe Price’s head of global fixed income, but will drawn on their research teams worldwide. The strategy will target returns of LIBOR + 200 basis points, though we note that such targets are often not terribly meaningful. The manager will have the ability to invest across the global credit spectrum from developed to emerging markets and including high yield, currencies and derivatives.
Julius Baer Asset Management plans fund range rationalisation
Following the split from its investment banking operations, Julius Baer plans a reduction in its fund range of 20 to 25%. The newly independent asset manager wants to reposition its fund range, and is looking at closing or merging funds with assets under management of less the SFr 50m. In addition to rationalisation, the asset manager will focus on products that target satellite elements of portfolios rather than core elements, for instance in infrastructure, energy, commodities and healthcare. The move points to the problem with asset manager restructurings--they usually lead to a number of decisions being taken that are good for the business, but are often bad for fund shareholders. It also highlights something we've noted before--there are too few funds chasing too little money across Europe. It's the asset managers' own fault for launching funds too aggressively in the bull market, but now shareholders who believed the marketing hype and bought the funds find these funds being merged into other offerings that in some cases have little to do with the funds they originally bought. We would encourage the regulators to step up and make sure that investor assets are not being shunted into inappropriate funds for reason of business efficiency.
Morningstar qualitative ratings and reports issued this week
Morningstar issued new qualitative ratings and reports on a number of funds available to UK investors this week, including Baillie Gifford European Smaller Companies, Baillie Gifford Japanese, Fidelity Funds - Asian Special Situations, and BlackRock Global Equity. Click here to see the full list.
