The prospect of veteran fund manager Richard Buxton taking on a yet more enhanced role at Old Mutual shouldn’t concern investors in his £2.2bn Old Mutual UK Alpha fund, according to advisers.
Reports emerged this weekend that Mr Buxton, who, in addition to his fund management responsibilities has been chief executive of Old Mutual Global Investors, is negotiating with potential private equity partners about potentially leading a management buyout of the company, which has assets under management of around £23bn.
Old Mutual Global Investors is to be split from its parent company, Old Mutual, next year in a “managed separation.”
Many investors took the view this would mean an initial public offering (IPO) for the unit.
If Mr Buxton does become part of a group launching a takeover offer for the company, it would be an extra tranche of the responsibility for the veteran investor.
Mr Buxton runs the £2.2bn Old Mutual UK Alpha fund, investors in the mandate have endured a tough time in recent years.
The fund has underperformed the IA UK All Companies sector in the slightly more than four years since Mr Buxton took the helm.
It has returned 30 per cent since June 2013, compared with 40 per cent for the sector average in the same time period.
The fund has very substantial exposure to UK banks and mining companies.
Many of those companies have performed poorly in recent years as investors have focused on more growth oriented names.
Darius McDermott, managing director at Chelsea Financial Services, is a long-term fan of Mr Buxton, and said he is unconcerned about the fund's recent performance and what impact a takeover bid could have on his focus.
Mr McDermott said the value investment style favoured by Mr Buxton has been out of favour with the market, and that the fund manager was also caught out by Brexit, which he didn’t feel would happen.
In the run-up to the European Union referendum vote Mr Buxton declined to answer questions about how to position a portfolio in the event the country voted to leave the EU by saying it “wouldn’t happen.”
Mr McDermott said the investment style being out of favour, rather than the fund manager being distracted by his chief executive role, is behind the underwhelming performance.
He added he does not feel a new management role would impact on the amount of time Mr Buxton would be able to devote to the fund.
Alastair Cunningham, who runs Wingate Financial Services, said: “As long as these transactions are made with “arms-length” due diligence I do not see an issue.
"What unitholders in the funds likely crave most is some stability and hope any deal will achieve that.”
Danny Cox, chartered financial planner at Hargreaves Lansdown, said: “Predominantly we rate managers on their long term performance and their ability to add value for the investor by picking good companies to invest in.
"We consider other factors, including their team and the management structure but ultimately the key determinant is whether the manager is delivering for investors.”
Earlier today (4 September) Old Mutual Global Investors (OMGI) announced plans to split out its multi-asset business from its single strategy line ahead of its parent firm's listing next year.
The move lends weight to suggestions the latter business may not form part of the company in the future.
OMGI investment director Paul Simpson will take over the multi-asset arm, with current chief executive Mr Buxton leading the remaining single strategy fund house.
Parent firm Old Mutual Wealth (OMW) said that both the single strategy and multi-asset business lines had grown "in their own right" since the OMGI was created in 2012, and both had potential to grow as separate businesses.
However, the firm was at pains to highlight how multi-asset investing was at the core of OMW's proposition ahead of its 2018 listing.
It added that it was assessing "internal and external structures for the single strategy business to continue to develop it further".
The firm's multi-asset business is heavily integrated with OMW and its discretionary business Quilter Cheviot - managing a range of multi-asset and multi-manager funds, and model portfolios.
david.thorpe@ft.com
