Investors pull £4bn from Merian fund in one year

Investors pull £4bn from Merian fund in one year

Investors have withdrawn £4bn from the Merian Global Equity Absolute Return fund over the past year, but its manager is sticking to his guns.

The fund has lost 10 per cent over the past year to August 1, compared with a loss of 3 per cent for its Absolute Return sector in the same time period. It has lost 8 per cent this year to date. The fund is currently £6.3bn in size. 

But Ian Heslop, who is the lead manager of the fund, said the returns had been dragged down by "uncharacteristic" performance and that the fund had successfully outperformed following challenging periods in the past, therefore the investment approach would stay the same.

He said: “The Merian Global Equity Absolute Return Fund has strong long-term performance, successfully providing low correlation, low volatility and portfolio diversification.

"One year returns have been impacted by a period of uncharacteristic performance in late 2018/early 2019, primarily due to fast-paced style rotation in markets.

"Further, unusually high correlation between investment themes throughout this period dragged on the performance of factor-driven strategies.

“While we are continually looking to learn from periods of market dislocation, the fund has successfully outperformed following challenging periods in the past and we have already started to see a recovery in performance.

"We remain faithful to our investment process, as it has proved itself over the long term."

The fund has returned 16 per cent since launch, compared with a return of 20 per cent for its sector. 

Mr Heslop manages the fund alongside two other named managers, and is also a shareholder in Merian Global Investors, having been part of the management buyout of the firm in December 2017.  

The travails of the Merian Global Equity Absolute Return fund mirror those of the wider sector. 

The Standard Life Global Absolute Return Strategy has had £10bn of outflows over the past year, while a net of £5.4bn was withdrawn from the sector. 

The sector average return over the past five years is 8 per cent, while the sector has lost money over the past year. 

Absolute Return funds were the best selling asset class in 2015 and 2016. 

Ben Yearsley, a director at Shore Financial Planning, said: “The returns have not been there consistently in recent years.

"There was a time when they had the excuse that such funds tend to underperform when equity markets are performing well.

"But even during the turbulent market conditions of the past year, the returns of the funds have not been attractive. They are a waste of time."