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Buy lists drop M&G Global Basics

The underperforming £4.3bn global basics fund could be a different beast under new management, says Chelsea Financial Services.

M&G Global Basics has been removed from buy lists after it was announced manager Graham French is stepping down from managing the underperforming £4.3bn fund.

French has retired from day-to-day fund management with immediate effect, with deputy manager Randeep Somel taking over the portfolio.

According to FE Analytics, the global basics fund has returned just 1.55 per cent over three years to 18 November compared with an Investment Management Association global sector average of 29 per cent.

Chelsea Financial Services managing director Darius McDermott says the fund has been downgraded to hold because the fund, founded and built by French, is aligned to his investment approach.

McDermott says the fund could still change direction, but the new management “changes the game” for long-time investors in the fund, particularly around investing in technology stocks which French had avoided.

He adds: “It may well turn out that Somel is the man to take the fund onto what M&G sees as its next stage but I think it will be become a very different fund under his management.”

Hargreaves Lansdown analyst Kate Marshall says the fund has been removed from the company’s Wealth 150 list.

Marshall says as Somel has worked closely with French for more than five years and was made deputy manager in January 2010, the investment philosophy will not change.

She says: “We believe short-term performance will be determined by the fund’s existing investment approach. However over a prolonged period, performance will depend on the adaptation of the new manager’s own style.”

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