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Venturing forth

The decision of the four Murray VCT boards to sack Murray Johnstone as manager and move the contracts to Close has surprised many industry commentators.

The Murray VCTs, which were acquired by Aberdeen along with Murray Johnstone in 2000, have long-term poor performance records. But the new team, headed by Aberdeen’s Judith McKenzie, had produced returns of between 29 and 36 per cent over four months since September last year on the measurable Aim-listed part of the VCTs. The funds are invested between 5 and 18 per cent in Aim.

But the funds had a long way to come back. Respectively launched in Septem-ber 1995, February 1997, February 1998 and February 2000 with a net asset value of 1, Murray VCTs 1, 2, 3 and 4 are now worth 34.1p, 44.2p, 54.4p and 74.6p respectively.

Since the departure of fund managers John Simpson and Jonathan Diggines last September, the funds have been run by Aberdeen’s Bill Nixon and McKenzie.

They have been proactive in investing an element of the portfolios in the Alternative Investment Market, which has helped to improve returns.

Hargreaves Lansdown investment manager Ben Yearsley says: “What has really got my goat is that these funds have been performing badly since their launch. The boards have had five years to appoint new managers but they did not. Now they are blaming Aberdeen for Murray’s poor performance.”

He questions the logic of moving fund management south, when most companies in the VCTs are based in the North. He thinks the move will be expensive and at the cost of shareholders.

Close Wins investment trust analyst Charles Cade points out that boards are ultimately independent and cites the moves of Edinburgh Investment Trust to Fidelity and Legg Mason Investors Enterprise to Schroders as examples of boards changing managers in cases of poor performance.

“Boards asserting their independence where managers are not delivering is a good thing,” says Cade.

But Chelsea Financial Services bond manager Matthew Woodbridge says, historically, some boards were not seen to be truly independent, which caused reluctance to sack managers who became too close to the board. He says: “A lot of VCTs have picked people for their boards who have no qualms about telling managers to pull their socks up.”

Woodbridge says while Nixon is a talented private equity manager, Close has proved to be excellent at managing VCTs. The Close VCT is in the top quartile for five-year performance. He says: “I think Close is better than Aberdeen. Its track record speaks for itself.”

Maxwell Packe, chairman of Murray VCT 2, says the decision to move was taken because the board was totally dissatisfied with performance. He says the costs of merging VCTs 1 and 2 would have been astronomical and not in the best interests of shareholders.

Packe also dismisses as “ludicrous” the suggestion that the Murray boards were trying to safeguard their jobs. He says: “I am totally in favour of merging trusts in principle but noit in this case. For anyone to suggest that 12,000 to 15,000 a year is going to have an effect on board members’ decisions – I doubt it.”

Cavendish fund manager Paul Mumford says it does not make sense to move the funds if performance is improving and wonders if Aberdeen is still suffering from the stigma attached to the split-cap debacle. “It would be better to keep running on a good horse rather than take it back into the stables,” he says.

The issue also prompts questions over personality clashes between boards and managers. But Packe is keen to rebut suggestions of a falling out with Nixon. He says: “I do not want to get into personalities. This is about 20 directors being convinced that it was in the shareholders’ best interests to change management. We would have moved management before but VCTs 1 and 2 were not of sufficient size.”

Woodbridge feels the move is good for the industry as a whole because some boards act more in the interests of shareholders than others. He says: “It sends out a warning that boards do have power. I think there will be more consolidation in the industry, where mandates will be offered to better managers. Close would not have taken these trusts on without thinking it could do something with them – it is not just in the business of asset gathering.”

Yearsley believes Nixon is an excellent fund manager and has personally invested in the Aberdeen growth opportunities 1 and 2 funds managed by Nixon. He says: “The day Bill Nixon took over the Murray VCTs, I changed my opinion on them. In one sense, Nixon has had rubbish funds taken off his hands but in the case of the Murray VCTs, it would be best for the shareholders if they had stayed with Nixon.”

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