Manager turnover speeds up at investment companies
Turnover at UK and offshore investment companies has risen rapidly, with almost one in five fund managers being replaced in the past 18 months amid growing pressure to improve performance, reports the Financial Times.
Figures from the Association of Investment Companies showed that 18 per cent of funds had appointed a new person either as sole manager or part of a team since the start of 2014. In the 2014 calendar year the figure was 13 per cent, compared with nine per cent in 2013 and six per cent in 2012.
“It is interesting to see so many high profile changes in a relatively short period of time,” said Ian Sayers, chief executive of the AIC. “This is in part a coincidence, with a number of managers having retired after a long period of managing their investment companies.
“But it also reflects independent boards addressing long-term performance issues, a feature of the sector that is often underestimated but one which can be of huge benefit to shareholders.”
Active fund managers have been under increasing pressure in the past few years as market trackers have slashed fees, while at the same time often delivering better performance.
Figures from Bank of America Merrill Lynch last year showed that fewer than 20 per cent of active managers were beating the market, their worst performance for more than a decade.
The AIC turnover figures represent a relatively small sample of the UK asset management industry, but do point to an interesting trend, say some investors.
One head of global equity at a UK group said: “As active managers, we are under greater pressure to deliver returns, particularly with the growth of ETFs [exchange traded funds] and other trackers that are very cheap.”
The AIC represents 345 investment trusts and investment companies with £123bn under management, which have a closed end structure, independent board and the ability to borrow.
They are mostly domiciled in the UK, but some are domiciled offshore, typically in the Channel Islands.
Investment companies and investment trusts have what some in the market refer to as permanent capital because they are not open to new members or shareholders. Shares in the company itself can be bought or sold, but the underlying capital remains fixed.
Relatively new managers include Paul Niven, who took over the reins at Foreign & Colonial Investment Trust in July last year after a 17-year stint by Jeremy Tigue.
Other companies with managers appointed in the past 18 months include Scottish Oriental Smaller Companies, Fidelity China Special Situations, Henderson Global Trust and Edinburgh Investment Trust.
In the broader asset management industry, Simon Pryke, the chief investment officer of Newton Investment Management, is leaving, highlighting moves at other groups outside the investment trust sector. He will be replaced by Charles French in the newly created role of head of investment.