Rathbones repositions with launch of Recovery fund

As a result, Hugh Yarrow, manager of Rathbone's high income fund, will leave the group as his £15m fund is merged into the £32m Blue Chip Income and Growth fund.

Meanwhile the underperforming Special Situations fund will be merged into the Smaller Companies fund and relaunched as the Rathbone Recovery fund, with a new investment objective.

The Special Situations fund has struggled in recent times, losing 57.9 per cent in the year to 28 February compared to a 32.3 per cent fall in the FTSE All Share index.

Jason Witcombe, director of London-based Evolve Financial Planning, said he was wary of management groups which scrap poor performing funds.

He said: "Closing down poor performing funds conveniently removes that fund's poor history and allows groups to concentrate only on the better track records of their other funds.

"It means there are a lot of funds out there with what we call 'survivor bias' to them. Investors need to have a good look under the bonnet to see just how good some of these funds really are."

Rathbones said the Recovery fund would invest primarily in British companies and possibly some European stocks.

It will be managed by Julian Chillingworth and Marina Bond who will invest in companies with recovery potential which is not appreciated by the market.

The fund - which will sit in the IMA UK All Companies sector - will then sell the stocks as soon the market recognises the potential, Rathbones said.

Mr Chillingworth will also manage the Blue Chip Income and Growth fund which usually invests at least 75 per cent in FTSE100 stocks.

Carl Stick will relinquish control of the Special Situations fund to concentrate on his £504m Income fund.

David Holloway, head of marketing for Rathbones, said the changes to the fund range were made in response to the turbulent market.

He said: "Market conditions have prompted us to review and streamline our range of products and launch a new initiative appropriate for business conditions and in anticipation of future demand.

"Now is the time for positive action and out of it will come products that are well-positioned to provide our clients with suitable UK equity investments for the future."

He said that the new Recovery fund would give investors an opportunity to "take advantage of the coming recovery in world markets and the global economy".

The changes will come into effect at the end of May, pending FSA and unit-holder approval.