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Is Threadneedle getting the point?

Management moves and fund charge rises have thrust Threadneedle into the investment spotlight.

Graham Kitchen was appointed from Invesco Perpetual as head of UK equities in October last year to try to turn equity performance round.

The firm has just raised management charges on its UK monthly income, UK growth and income and UK equity income funds from 1.25 to 1.5 per cent. All the funds are in the bottom 15 per cent of their sectors over three years and market commentators have been critical of the charge increases.

Hargreaves Lansdown investment manager Ben Yearsley says: “This is not good enough. Going back five years, Threadneedle had very good core holdings in the UK, Europe and the US. They did not set the world on fire but they were good core holdings and now they are not. All you want from a core holding is to outperform the average.”

Threadneedle head of UK retail and wholesale Guy Beech says: “We have grasped the nettle with our UK funds. Graham’s appointment is a real coup because he has fantastic UK skills. I think some of the dull but worthy assessments have been fair in the past but Graham’s appointment is just part of a massive injection into our retail equities team.”

Last week, it was revealed that three members of Threadneedle’s high-yield bond team are to leave this summer after being recruited by hedge fund manager Moore Capital. Threadneedle says head of high-yield bonds Richard Whitman has plenty of time to bring in new managers. Head of UK distribution David Gasparro says one fund manager with previous high- yield experience has already been moved in from the credit team.

The company’s high-yield bond has returned 37.9 per cent over three years and is ranked second out of 32 funds.

Yearsley says: “They had a reasonably good bond product and then they went and lost three people. It looks bad when people walk and these days firms need to find replacements fairly quickly. It is so much easier for people to switch funds on supermarkets cost-effectively and without being out of the market for three weeks. Threadneedle need to sort out replacements as soon as possible or money will walk out of the door.”

The company has also lost director of investment sales John Campbell and Mark Holden, who managed the UK Accelerando fund. These departures were followed by the replacement of Darrell O’Dea with Phil Cliff as head of Threadneedle’s European select growth fund which has returned 13.2 per cent over the year to April compared with a sector average of 14.9 per cent and is ranked 56th out of 98 funds.

Bestinvest business development manager Justin Modray says manager moves are not good for any business in the short term, and it is always a concern to see high manager turn-over but he defends Threadneedle.

Modray says: “A shake-up is not necessarily a bad thing although it remains to be seen if these moves are part of a bigger reshuffle. Being realistic, I think Kitchen’s appointment is a good thing, certainly for the UK side of things. At worst, advisers might be a bit wary of using Threadneedle for a year or so until things settle down, with managers having to prove their mettle, but as long as things settle down after that then current moves could be good for the group.”

Threadneedle PR manager Stephen Moore says: “There is a kind of expectation about Threadneedle because it is, to some extent, one of the jewels in the fund management industry’s crown. When changes happen, IFAs generally remark on them because of the name the company has built for itself.”

Michael Philips proprietor Michael Both says he is wary of the group following management moves but says Threadneedle’s approach is about the process, not the art, of investing.

He says: “You cannot help feeling that managers at Threadneedle are just keeping the seat warm until somebody else comes along. They place less emphasis on individual fund managers than groups like Fidelity or Invesco Perpetual and I am less inclined to give them the benefit of the doubt.”


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