Big funds under review after Wealth 150+ listing

Discretionary managers are reviewing their holdings in major funds run by Artemis, First State and Newton due to concerns about their size after they were revealed to be on Hargreaves Lansdown’s new list of recommended funds.

Thesis Asset Management and Whitechurch Securities said they already had concerns about the sizes of funds such as Artemis Income and Newton Asian Income and being on the list is the “final nail in the coffin”.

The Wealth 150+ list was announced by the Bristol-based discount broker and consists of 27 funds it has achieved discounted prices on. The broker is expected to significantly market the new list meaning it is likely the funds will see big inflows.

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Steven Richards, investment manager at Thesis, said he had been questioning the merit of being invested in the Newton and Artemis funds.

He said the recent underperformance of the two funds could be partly attributable to the large size of the funds, preventing them from investing flexibly.

He said the inclusion of the two funds on the Wealth 150+ list had “accelerated” the firm’s review into its holdings.

“Now that they are happy giving a greater discount to Hargreaves Lansdown that is the final nail in the coffin for our investment in these funds.”

Mr Haynes said he was concerned about the inclusion of the Artemis and Newton funds, as well as First State Asia Pacific Leaders fund, because he thought significant new money into the funds might harm performance.

He said: “I am surprised the investment houses concerned have been prepared to cut the management fees.

“There seems to be an intention to get assets into these funds and that does concern us and it means they will be under review.”

Artemis had told Investment Adviser last year that it was closely monitoring capacity on Adrian Frost and Adrian Gosden’s Artemis Income fund in the wake of Neil Woodford’s announcement that he would be leaving Invesco Perpetual.

The fund was widely tipped to be a major beneficiary of any outflows from Mr Woodford’s funds but its size has been largely unchanged by the announcement as yet. First State also raised concerns about the size of the Asia Pacific Leaders fund, which is run by star manager Angus Tulloch, in 2013 in a letter to clients.

The group warned that if the fund grew in size any further then it may take steps to discourage new investment, which it later did with its Global Emerging Markets Leaders fund by placing a 4 per cent initial charge on new investments.

However, since its peak in March 2013, when First State first issued its warning, the fund has decreased in size by more than £1.5bn as investors withdrew money from Asian markets following stockmarket falls.

Newton has not suggested its Asian Income fund, managed by Jason Pidcock, has any issues with capacity. The fund has continued to generate inflows in the past year in spite of also being hit by the negative markets in Asia.