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Abbey’s ailing flagships come into harbour

Chris Salih says Santander’s decision to bring two of its biggest funds in house has left investment commentators unimpressed.

Since acquiring Abbey in 2004, it seems that Spanish banking firm Grupo Santander has done its utmost to push into the mainstream UK market.

This week, two of Abbey’s major funds were brought in house under the previously little-known Santander Asset Management UK.

Fund managers Richard Moore and Hak Salih have joined the firm to manage the funds, run previously by third-party managers.

Moore, most recently at Old Mutual Asset Managers, will take on the £1.2bn Abbey UK growth fund which has consistently struggled to perform in a number of environments, having most recently been outsourced to JP Morgan, Barclays Global Investors and State Street Global Advisors.

Salih, who departed M&G last year after a poor run on the £300m income fund, takes over the £311m Abbey equity income fund. In his last year on the M&G income fund it returned 2.4 per cent, bottom in the sector at number 80.

BestInvest director of communications Justin Modray says: “It is a desperate move by a firm that is looking to get its name out there in the marketplace. The funds have been consistently fourth quartile since launch and why anyone would want to buy the growth fund in particular is beyond me, considering how poorly it has been handled and has subsequently performed.”

Modray says the biggest disappointment is the lack of commitment surrounding the funds. He says: “You need look no further than the track record of both funds. Both were poor performers when they were run in house originally, with nothing changing once Abbey outsourced them back in 2004. What proof is there that anything will change this time round? The only difference is they fall under the Santander Asset Management UK banner, which most quarters have not heard of and could subsequently give them a clean slate.”

The Abbey UK growth fund is 188th out of 219 funds in the UK all companies sector over five years while the equity income fund is 57th out of 65 over the same period.

Santander has also taken on Peter McLoughlin from Insight Investment as an assistant to Moore on the UK growth fund while Salih will be supported by Stephen Payne, who joins from Corporate Synergy.

Francesco Gasca joins the UK equity team from Santander in Spain. Gasca, previously a private banking portfolio manager, takes on a research role focusing on specialist products.

Santander chief executive officer John Bearman says: “These key appointments give Santander Asset Management UK a powerful and experienced fund management team covering core areas of UK equity and equity income fund management. Their track record of delivering superior returns to investors and effectively marketing their funds will prove invaluable.”

Moore’s departure from Old Mutual follows its decision to transfer the UK select large-cap and UK select equity portfolios to its quantative strategies team.

Both portfolios are fairly small and Modray says: “They have brought a relative unknown to manage a fund of considerable stature. Moore’s management record is not the most impressive on the whole, with a particularly low rating on our management record index. Hak Salih’s is somewhat better but advisers will remember he left the £300m M&G income fund after a run of poor performance.”

Hargreaves Lansdown head of research Mark Dampier is not surprised at the decision to bring the funds in house after a failed attempt to outsource them in a manager of managers approach in 2004. He says: “Santander has now decided this is not going to work and has brought the funds inside under the new guise. In its defence, it could say little or no money has come out of the funds but most has come from branches and IFAs who do not read newspapers.”

Dampier says investors will stay clear of the funds for a longer period through fear of another change.

“There is no direction on the funds, they have no management track record and who is to say that any management they bring in will not change after a few months of consistently poor performance? With regards to the managers, the norm with a large organisation is the group want someone and they want someone now, meaning that instead of waiting for managers to become available, the group has taken the best that they can find from the market.”

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