St James's PlaceJul 13 2021

SJP places two funds on performance watchlist

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SJP places two funds on performance watchlist
Chris Ratcliffe/Bloomberg

In its 81-page value assessment released today (July 13), of its 42 funds, nine were placed on an “amber” list with a further two placed on the more serious watchlist.

The two placed on the watchlist, the Alternative Assets fund and Japan fund, were said to have shown areas which “challenge” whether overall value is being delivered. SJP said neither fund had achieved their objective of capital growth.

The Alternative Assets fund, which has a value of £290m, is managed by Wellington Management which has run the fund since September 2018. 

Over the last three years the fund posted a return of -19.9 per cent, however in the past three months it has posted a 3.7 per cent return.

SJP said the fund’s underperformance compared with its benchmark was “heavily impacted by the underperformance of the fund’s value investment style skew, trend-based strategies and the challenges faced by similar alternative asset funds in recent years”.

It added since the last value assessment, when the fund was on the “broadly delivering value” list, one above the watchlist, it had taken steps to refocus the investment strategies by the manager.

The Japan fund, which aims for long term capital growth by investing in shares either listed on exchanges in Japan or with economic exposure to Japan, was created in November 2017 and is run by Nippon and Comgest.

The latter was added to the fund’s management in March this year due to concerns over underperformance.

In the three years to March the fund lost 16.2 per cent - though over the past year it has returned 31 per cent.

Its benchmark, the TSE Topix index, returned 17.3 per cent over three years and 39.9 per cent over the past year.

In the value assessment, SJP said it remained confident that Nippon will deliver long-term value for money, and highlighted the additional manager being added. 

It said Comgest’s investment style, called ‘quality growth’, would balance out Nippon’s value style. 

“We will continue to monitor all our funds and are committed to enhancing them if we believe it will improve long-term investment outcomes for our clients," SJP added.

Amber list funds

The funds that appeared on the “amber list” included the UK Income, UK Equity and UK & General Progessive funds, as well as the Gilts, Global Emerging Markets, Global Smaller Companies, Index-Linked Gilts and Money Markets funds.

SJP has since merged its UK growth and equity funds into the general progressive fund and renamed it the UK fund. The move saw it bring Baillie Gifford and LA Capital Management on board, while Majedie Asset Management was removed as a manager.

In the value assessment, SJP highlighted how since its last value assessment it had split its investment committee into four specialist committees to encourage a top down approach, as well as investing in a team of internal analysts who select managers and monitor funds.

The number of funds on its amber list and watchlist decreased this year compared to 2020.

Last year 17 funds were placed on the amber list, compared with nine this year, and five were placed on the watchlist in 2020 compared with two this year. 

A spokesperson for SJP said: “As a wealth management business, we are focused on client outcomes and therefore on long-term performance, so the five-year time frame we assess funds over is particularly important.

"We have always monitored our funds and external managers constantly, and we can and do take quick and effective action when necessary.

“It’s important to note that, based on our overall performance assessment, only 2 per cent of our funds are rated red by assets under management and 80 per cent are green.”

Why is SJP releasing this information?

As part of the Financial Conduct Authority’s asset management review, fund houses are required to carry out an annual assessment of whether the firm provides value for their clients.

The value rules, which have been in effect since the start of 2020, require asset managers to look at their performance, costs, economies of scale, comparable market rates, services and share classes.

Last week, the Financial Conduct Authority warned fund managers it will take action after a review found most value assessments were not meeting FCA standards.

The FCA conducted a review of 18 fund managers of different business models and sizes between July 2020 and May 2021 and found while some had been conducting value assessments well, “too many AFMs often made assumptions that they could not justify to us”, undermining the credibility of their assessments.

sally.hickey@ft.com