actively managed north american fund switches to quants strategy and retains fee structure
Poor performance has been cited as the main factor behind Ian Brady and Ian Cooke leaving Schroders and management of the group's active US equity funds being transferred to its investment strategy unit (ISU).
Brady and Cooke joined Schroders in March 2001, along with former Perpetual manager Phil Chappell, with the task of turning around the group's US performance. However, over one year to 2 September 2002, its £7m North American Fund, managed by Cooke, is ranked 75 out of 85 funds in the North America sector, returning -32.5% compared to the sector average fall of 27.4% offer to bid.
Management of the Schroder North American Fund is being transferred to Adrian Cronje, a senior member of the ISU. The group is not planning to reduce charges though moving from active management to an index plus quants set-up.
ISU, set up in 1996, uses a systematic driven quantitative approach that takes small bets against the S&P 500 with the objective of achieving outperformance of 1%pa with minimal downside risk and volatility.
Since October 2000 ISU has managed the Schroders WMF US Equity Fund and the recently launched ISF North American Equity Stigma fund. Cronje said by not taking large single bets on a stock or sector the ISU will avoid significant underperformance if a stock or sector blows up.
Also central to ISU's investment process, said Cronje, is disciplined portfolio construction, as such it uses PRISM the group's proprietary risk management tool that is run on a daily basis to aid understanding and quantification of all sources of risk and return.
Since its launch on 23 October 2000 to 23 September 2002, the Luxembourg domiciled WMF US Equity Fund, in dollar terms has returned -37.73%, compared to the S&P 500 which returned -37.86% and the offshore territories Equity North America sector average of -42.24%.
Chappell, manager of the Schroder US Dynamic Growth fund left the group in May this year and is to join the US equities desk at Scottish Widows Investment Partnership (SWIP) as investment director in early October. Management of his fund was taken over by Simon Webber. At SWIP, Graham Wood, investment director, head of global sectors and international research, said Chappell would not be assigned a fund to run immediately and would be undergoing an assessment period which would take around a month. Wood said one of the options is for Chappell to be assigned several retail funds once the assessment had been completed, but which exact funds Chappell would run has not yet been decided.
Chappell had a growth at a reasonable price management style with a slight tendency towards value, Wood said.
Mark Dampier, head of research at Hargreaves Lansdown, said the cull in managers demonstrates how tough the business environment has become and that funds, which are not obtaining good performance are simply not winning any business.
He said: 'I can see wholesale groups going under if these conditions continue for much longer. Groups are now becoming more institutionalised in the fact they are no longer prepared to look at the long-term picture.
'Unit trust companies will now be looking at the funds in their range which are not growing and they will start cutting them.'
Clarke replacing Balkham
'Deep-dive analysis of client behaviour'
Ways to mitigate April’s increases
The best equity income funds examined