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Aidan Kearney: 2013 has been a year of change for UK equity funds

The spate of fund manager moves in the UK equities sector highlights the need to have a robust procedure on whether to stay or go when a manager leaves.

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Change happens. It is not unusual and it cannot be avoided. The UK equity fund management industry is renowned for its stability, with manager moves usually few and far between. This year has turned all of this on its head.

The obvious two movers are Neil Woodford of Invesco Perpetual and Richard Buxton of Schroders. However, there have been many others.

Philip Matthews was poached from Jupiter by Schroders to replace Buxton, River & Mercantile lost Richard Staveley to Majedie, Hugo Tudor retired from fund management after 13 years at BlackRock, a company that had only recently lost Nick McLeod-Clark to long-term sickness. James Clunie left Scottish Widows Investment Partnership to join Jupiter and take over the reins from Phillip Gibbs (Jupiter Absolute Return) as he plans his retirement next year and GLG equities hedge fund manager John White handed over his funds in order to take a more senior role at parent company Man Group. Then, of course, there is Mark Lyttleton who left BlackRock earlier this year. And all of this is before you even consider the full Cazenove UK equity team exodus to Schroders.

The most important point to grasp is that it is how you deal with change that makes the biggest difference. In the investment world, when a manager changes, particularly a high profile one, there will inevitably be work to be done.

At a glance, the options available are simple: you either choose to stay with the fund or you leave. If the former route is taken you need to ask yourself is it for the right reasons and is it an active decision. For the latter, you need to think about where you are going to move to.

The key to both is to gather all the available facts about how your fund is positioned now – i.e. the type of stocks, what the active bets are in terms of key over/underweight positions.

But you should also go further. This is not the time to invest by numbers; be sure that you understand the resources available to the new manager, and importantly his or her outlook. It is only by gathering together all of this hard and soft information that you can make a truly informed decision.

Do not act on others reactions. For one, your circumstances are likely to differ and any action you take should be relevant to you. That said, you must be aware of the impact of the reactions of others as this will affect fund flows. It is simply another factor to consider as part of the wider picture.

That leads neatly on to the final point, which is best expressed by John Maynard Keynes’ famous quip “When the facts change I change my mind. What do you do, sir?” In this case though we might adjust it to say “…I reserve the right to change my mind”. The decision may be to change your investment or not but that in itself should be an active, not passive, decision.

Of course it goes without saying that there is no distinct answer as to whether one should stick or twist. We have many examples where we have stayed put, a case in point being the GLG UK Select fund recently. On the other side of the coin, we sold the Jupiter Absolute Return fund when Philip Gibbs left.

While 2013 is an extreme case, it easy to see how keeping track of all of this change is a full-time job. And, with UK portfolios typically having a heavy domestic bias, investors would have been lucky to have not been affected by all of the change this year. The fact that new managers can change the way the portfolio is run, changing the job it does in your portfolio, poses a considerable challenge. For many it can make a great deal of Sense to outsource to a multi-manager in order to stay on top of everything.

Aidan Kearney is director of multi-asset at Aberdeen Asset Management 

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