SJP claims Woodford would not have passed new tests

Rob Gardner, director of investments at SJP, told FTAdviser the firm had improved the “management information” within its investment process and would likely pick up on the “series of amber flags” which surrounded Mr Woodford’s funds.

He said: “There wasn’t one big red flag [in the lead up to Mr Woodford’s downfall] but when you get a series of amber flags, you look at it and it adds up.

“None of those issues were bad enough on their own to raise something, but in hindsight we can see those mini things could add up. That’s something we’ve worked on, to better capture a fund and have a clear dashboard monitoring a whole load of things.”

SJP has also reviewed and subsequently tightened its environmental, social and governance process, Mr Gardner said.

Although the national advice firm had been involved in ESG investing since 2014, there were “ESG red flags” that were not implemented in its investment process.

He said: “Your ESG has to have ‘bite’. Woodford Investment Management had a bad ESG score, both in terms of stocks and how they went about their investments.

“They didn’t have an ESG resource. It was a really clear piece, he wouldn’t pass our ESG tests now.”

SJP has recently put new requirements in place meaning all its fund managers have to sign up to the Principles for Responsible Investment. 

Mr Woodford ran more than £3bn of assets for SJP’s clients through its St James’s Place UK High Income, UK Equity, and UK Income Distribution funds.

SJP had been a steadfast supporter of the underperforming fund manager and in the weeks leading up to his fund’s suspension had said it would stick by Mr Woodford.

But in the aftermath of Mr Woodford’s flagship Equity Income fund being gated, SJP stripped him of his management responsibilities.

The ‘f-word’

SJP has come under fierce scrutiny over recent years due to its allegedly high fees, but in its debut assessment of value report, published last week (July 15), it claimed it compared favourably with similar portfolios of funds.

When asked why, if its charges are in fact in line with the industry’s standard, SJP received so much criticism regarding its costs, Mr Gardner said it was because the “big firms get the most scrutiny”.

He said: “You see it with Merrill Lynch in the US. The big firms get the most scrutiny, so the media will focus on SJP rather than someone else.

“We know from [independent reports] and from the advisers we recruit, so we know what fees get charged elsewhere, that we’re not cheap but we know we’re in the middle of the park.”

Mr Gardner also thought SJP had “not done a good enough job” at providing the counter-narrative to accusations of high costs and explaining why the firm thought it added value.

The future

Looking forward, Mr Gardner said SJP would naturally end up managing about £200bn of client money in the next few years, with growth and its typical £1bn of inflows per month.

He thought this was only a good thing. He said: “Our size and scale gives us real influence to negotiate fees, to make sure the fund managers are signed up to PRI and to ensure we’re thinking seriously about climate change.”

SJP has already announced plans to launch a low-cost range of systematically-run funds to create high-capacity, low-carbon solutions for its clients.

But Mr Gardner said straight-forward passive funds would not play a role in SJP’s future fund offering, as most passive offerings were not able to “flatten the carbon curve”.

Instead, he said he wanted SJP to offer a range of funds with lower and higher costs involved so investors could pick a “blend of funds”.

SJP also plans to launch a range of ‘in-retirement funds’ to service its main client demographic, 55 to 85 year olds. The aim is to help clients manage the deccumulation phase, where wealth needs to be transferred to income.

imogen.tew@ft.com

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