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Investors ‘too quick’ to pull out of SLI Gars fund

Investors ‘too quick’ to pull out of SLI Gars fund

Senior industry figures have said the decision by one trustee to pull £170.6m out of the Standard Life Gars fund could have been too hasty, saying the fund is likely to “pick itself up off the floor”.

These comments come after a pension scheme decided to divest its £170.6m holding in the Gars fund, of which £122m was moved across into a rival absolute return offering run by Aviva.

Mark Dampier, head of research at Hargreaves Lansdown, said often trustees are a bit too quick to make these decisions after a short period of poor performance.

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He said the main problem is people don’t understand the strategy fully, so when it goes through a difficult period, they don’t have the conviction to hold it.

The research boss said Gars is a difficult fund to analyse because it does not use a conventional investment strategy, meaning it’s really hard to fully understand why it’s had such a poor time and how it will get better.

“To me, it’s seems the investors have made an emotional decision; trustees can be too impatient.

Mr Dampier also said there is always a danger that people will do the same, adding it’s up to Standard Life to “come out fighting”.

“They’ve got so much money in the fund that I find it hard to believe they won’t pick themselves up off the floor again.” 

Andrew Wilson, head of investments at wealth manager Towry, echoed Mr Dampier’s points, saying: “I highly doubt that most of the investors in the Gars product have any idea how it actually works, or indeed what risks and rewards they could expect in the future.” 

While the fund’s performance has been less attractive recently, he said it is difficult to know how to attribute that between the loss of key team members, the sheer size of assets under management, or just bad luck.

He also said short-term struggles are “inevitable”, and any investor or fund will be faced with difficulty from time to time.

“There is no guarantee the Aviva fund will perform better, going forward, and the reported switch may actually mark an inflexion point where Gars goes on to outperform."  

Mr Wilson said: “In any event, that would fit with the observed history of mandates being changed at unfortunate times, with the new manager often going on to underperform the terminated programme.  

“So, this might actually be a good contrary indicator for Gars investors.”

Darius McDermott, managing director of Chelsea Financial Services, said he can see why the investors decided to make the switch when looking at the performance of the fund over the past 12 to 18 months.

He said this move doesn’t look good for the Gars fund, and is on the back of a difficult year performance-wise where Aviva have outperformed them.