Legal & General Investments’ commitment to active management has been questioned by multi-managers and advisers after its star bond manager Richard Hodges announced he is quitting the group.
Mr Hodges has been at L&G for seven years and runs its popular £2bn Dynamic Bond Trust. His departure, due in October, follows that of fellow bond managers Michel Canoy and David North in the past 18 months as L&G has pushed its core focus as a tracker fund manager.
Last year the firm launched its L&G Multi Index funds, a range of fettered index-tracker funds, and managing director Simon Pistell said the firm was preparing for a surge in passive sales.
Alongside the firm’s increased focus on passive investment, experts suggested Mr Hodges leaving would be concerning for those invested in L&G’s active funds. Robert Bowie, co-manager of the Aberdeen multi-manager range, said: “It does raise questions for us clearly in terms of the commitment Legal & General have behind the active side of the business.”
Andrew Alexander, head of investments and product strategy at Three Counties, said L&G now seemed to be focusing on the tracker fund part of the market, looking to rival Vanguard.
“If you look at all of Legal & General’s marketing now it is all about the index trackers that they run,” he said.
“They are looking at where they will get the most money and they think it is within trackers, because you do not even need men on the ground to sell trackers when it is all about cost.”
Shauna Bevan, collectives investment manager at Charles Stanley, added she thought L&G had “always struggled” to demonstrate its commitment to active fund management but this was not a concern “when a manager like Dickie was in place who clearly had a flexible mandate to manage the portfolio actively”.
An L&G spokesperson said: “Legal & General has strategic intent to grow its presence within the active equity funds market. Our focus will be on our three core equity competencies: equity income, high alpha and real income.” They added that more than 70 fixed income professionals are responsible for £80bn in active fixed income.
“There will be absolutely no let-up in this hugely experienced, intellectual, high capacity resource. It has been the backbone of consistent high levels of performance,” she said.
Mr Hodges’ flagship £2bn L&G Dynamic Bond Trust is set to be taken over by Martin Reeves, though Mr Hodges is expected to continue to help manage the fund for a transition period before leaving.
But fund buyers questioned whether Mr Reeves, who currently heads up L&G’s high yield team, has the mindset to run the fund as Mr Hodges has done.
Ian Aylward, head of multi-manager research at Aviva Investors, said: “A strategic bond fund needs flexible and independent thinking but I’m not sure there are others in the team that have that kind of absolute return mindset.”
Ms Bevan said Mr Reeves had “never managed anything with as many moving parts as Dynamic Bond Trust before” and will have to lean on other team members for ideas much more heavily than Mr Hodges did.
