The chief executive of Old Mutual Global Investors has said investors in his £2.3bn Old Mutual UK Alpha fund understand the vehicle’s performance will be lumpy in the short-term.
Despite having a good run for a number of years, star manager Richard Buxton’s UK Alpha fund has lagged behind the UK All Companies sector since 2013, and - according to FE - slipped into negative territory over the past year.
Mr Buxton said some of his holdings “really suffered” in share price terms last year.
“The losses were partly caused by us selling down those highly favoured consumer staples like tobacco, which continue to outperform.
“This masked that there are still lots of stocks that are doing well in the portfolio,” Mr Buxton said, pointing to the portfolio’s BP and mining stocks, which have “rallied fantastically” year to date.
“But it has all been offset by the financials being weak, not because of what is going on in their individual businesses, but this move down in bond yields.
“Do I think we have completely lost the plot? No,” he said, comparing his current fund’s swing between outperformance and underperformance to the Schroders UK Alpha Plus vehicle, which he ran for 11 years.
“I don’t like underperforming and I’m not happy with it. I want to deliver good returns for the clients, but fortunately most of my clients know I’m a very long-term investor with a very low turnover, and so they understand the performance will be lumpy in the short-term.”
While he might be considered a “star” manager, Mr Buxton admitted the term is not one he likes.
In fact, when speaking to FTAdviser, Mr Buxton was quick to herald a cultural shift away from star managers, suggesting investors should instead re-direct their attention to fund management teams as a whole.
This comes after accountancy firm PricewaterhouseCoopers predicted high profile managers could face a hit to their pay packets in the wake of increasing scrutiny from both regulators and shareholders.
Tim Wright, partner in PwC’s reward team, claimed attention will turn to team-based incentives over the next four years, which he argued should mitigate risks for firms when big name fund managers leave.
Do I think we have completely lost the plot? No. Richard BuxtonMr Buxton said: “My remuneration is based on a desk-based pool of revenue and profitability, so there is no way it is all about me.
“People love latching onto people and personalities, whether that is star managers or chief executives of companies.
“But we all know the reality is there are lots of people involved in helping build and grow any business.”
According to FE, star managers present one of the biggest threats to fund management businesses, particularly as high profile departures often cause firms to haemorrhage money.
Mr Buxton, however, pointed out his departure from Schroders in 2013 did not affect the company’s share price.
“By the time I left Schroders, UK equities in aggregate was only 6 per cent of the funds under management.
“Part of the attraction of coming to Old Mutual was that it was smaller, which meant we were able to really make a difference.”
Dan Farrow, director of Essex-based SBN Wealth Management, agreed that investors do rely on names too much, but said people tend to like a figurehead.
“People can become stars through clever marketing or making the right calls for one or two years, but then they tend to blow-up.
“More and more advisers are using passives and overlaying this with a smaller allocation to active managers, so it’s only the old school who still read the gospel according to Neil Woodford.”
katherine.denham@ft.com
