The third annual assessment of value (AoV) report from St James’s Place has seen it put funds run by Wellington, Somerset Capital and Comgest/Nippon on its internal watchlist.
There were 47 funds in the 2022 AoV, up from 32 last year. They are either rated ‘green’ for delivering value; ‘amber’ if they are broadly delivering value; ‘red’ if value is not being delivered; or ‘grey’ if SJP deems it “too early to say”.
The AoV was introduced in 2019 by the Financial Conduct Authority to ensure asset managers act in investors’ best interests. Each fund is judged against seven criteria: quality of service, fund charges, economies of scale, comparable market rates, comparable services, classes of units and performance.
Every fund rated amber or red failed to deliver on the same criteria – namely, performance.
|Rating||Number of Funds|
|Green – delivering value||28|
|Amber – broadly delivering value||13|
|Red – not delivering value||3|
|Grey – too early to say||3|
SJP said the three funds on the watchlist are “under heightened monitoring” and represent less than 0.86% of AUM.
Rob Gardner, director, investment management at St James’s Place, said: “Over the past three years our focus has been on improving client outcomes across our fund range. This includes performance, fees and embedding responsible investment across everything we do.
“As a result, we have made more than £100bn of fund changes as we continue to evolve our proposition and ensure its fit for the future. Our approach means we take action when needed with the aim of improving long-term performance.”
See also: SJP flags RWC and Majedie mandates for poor performance in debut value assessment
Failing to make the grade
In 2021, two funds were rated ‘red’ – Alternative Assets and Japan – for “having attributes which challenge whether overall value is being delivered”.
The Japan fund is the only repeat offender in 2022, having been flagged this year for not achieving its growth objective and underperforming both its benchmark and peer group.
In May 2021, Comgest was added as an additional manager alongside Nippon.
This was intended to “provide diversification and a blend of complementary investment styles”. SJP added it was “too early to draw firm conclusion on the performance of this fund” given how recently changes were made.
Launched in 2017 and firmly fourth quartile over one and three years, the £72.9m fund is yet to beat its benchmark, LF Japan Equities, according to data from Trustnet.
Fellow 2021 red-lister Alternative Assets was merged with two other funds – Multi Asset and UK Absolute Return – to form a single fund, which was subsequently renamed Global Absolute Return.
SJP opted not to rate the fund in the 2022 AoV, deciding it was “too early” to determine whether the unified trio is delivering value.
Joining Japan on the 2022 watchlist are its Gilts and Global Emerging Markets strategies.
Managed by Wellington, Gilts was determined to be “broadly delivering value” last year.
It was marked down after not achieving its growth objective and underperforming its benchmark and peer group. It has, however, achieved its income objective, SJP noted.
The £220m fund dates back to 2009 and has failed to make a positive return over any standard timeframe for the past five years.
It’s a similar story for Global Emerging Markets, which was taken over by Somerset Capital in February 2020. SJP said a number of changes have been made to the allocation and holdings, which will “take time to translate into long-term performance”.
The £281m fund also mimics its Gilts sibling in that it has not delivered any positive returns over the past five years.
See also: SJP’s £2.4bn emerging market equity mandate pivots to multi-manager strategy
The five funds downgraded from ‘green’ to ‘amber’ were:
|Balanced||GMO, Jennison Associates|
|Greater European Progressive||Burgundy, Ninety One|
|Strategic Income||BlueBay, MidOcean, Schroders, TwentyFour|
No fund was upgraded in the 2022 AoV in any colour.
The three funds without a rating are Global Absolute Return, Global Equity and UK.
In addition to the merger of three strategies to create the £1.8bn Global Absolute Return fund mentioned above, the £3.2bn Global Equity fund underwent considerable changes in November 2021, which affected its investment policy, benchmark and managers.
SJP said: “The investment policy was changed to remove the constraint to track an index and enable a more active investment approach.”
The previous four managers were replaced with Los Angeles Capital, Man Numeric and SSGA.
Finally, SJP took the decision to merge another trio of funds; UK Equity, UK Growth and UK & General Progressive, to form a single fund named UK.
The £1.7bn fund has six managers: Baillie Gifford, Blackrock, Columbia Threadneedle, Angeles Capital, Redwheel and Schroders.
“The change was made to simplify our UK equity offering, while aiming to deliver a smoother, more consistent investment return profile,” SJP said.