The causality dilemma

Secondly, further disturbance comes from specific fund cases.

Managers on the move

Over the past three years, there have been departures of fund managers from one investment company to another.

These moves were followed by significant outflows if these managers were perceived to be key individuals to the success of their fund. But it happens to be the case that the fund may have managed to beat its peers, despite the change in the investment team.  

Finally, I would like to point out two outliers in the data. Fundsmith Equity found itself to be in an extreme part of the second section, meaning that it had strong performance and managed to raise a large amount of capital, in fact the most out of any fund studied.

With an annualised excess return of 7 per cent over the past three years, manager Terry Smith has attracted £11bn of assets in his main investment vehicle.

Good marketing and good performance go hand-in-hand.

Conversely, Standard Life Investments’ Global Absolute Return Strategies fund found itself at the opposite point, being the extreme part of the third section, meaning it performed poorly and bled assets heavily. 

The fund bled assets to the sum of more than £15bn over the past three years – the highest of any of the funds studied – following a prolonged period of poor performance and changes to the fund’s management team.

All things considered, these numbers remain reassuring. The investment management industry appears to stick to its principles: “You live and die with your track record.”

Charles Younes is research manager at FE