Brokers’ concerns increase as Standard Life’s £17bn GARS fund sees another key departure

23rd July 2013

The Standard Life Investments Global Absolute Return Strategies (GARS) fund has lost one of its high profile fund managers with some brokers starting to get concerned despite the fund’s much-vaunted team approach. Investment journalist Cherry Reynard surveys opinion.

Some brokers say that Euan Munro, who has moved to the role of chief executive of Aviva Investors, was the architect of the successful absolute return strategy. With £17bn of assets, a lot of people have a vested interest in ensuring the fund continues to perform. Does Munro’s departure matter?

Standard Life Investments is clear that the fund is run using the ‘entire experience of the investment floor’. Over thirty people contribute to the investment strategy; the fund management team has already expanded significantly over the past two years and Guy Stern, who has been appointed as head of multi-asset & macro investing, has been meaningfully involved with the fund since inception. They have sought to reassure advisers and consultants that it is ‘business as usual’. However, Standard Life is worried enough to be
reviewing its remuneration policy in light of the departure as trade website Fundweb reports. It won’t want to lose anymore, but its case for a team approach have some merit. The fund has lost people before with no noticeable diminution in performance. Its size alone necessitates a team effort and Stern is undoubtedly very experienced.  Equally, the GARS fund has always been a target of some criticism. It has become one of the largest and most successful funds in recent years – attracting significant assets, while retaining strong performance – and has certainly drawn envious glances from many of its competitors. It may be suffering from ‘tallest poppy’ syndrome.

Equally, it continues to have some high profile supporters. For example, Charles Stanley Direct’s Rob Morgan, says that the fund remains true to its process and he is not deterred by short-term weaker performance: “I understand why it had a tough time, so it doesn’t concern me. What would concern me would be if their non-correlated assets started to act similarly,” he told website Trustnet.

However, Munro’s departure is a ‘blow’ according to Chelsea Financial Services’ managing director Darius McDermott. He had continued to support the fund through the departure in September 2012 of three members of the team to Invesco Perpetual, but is more worried at Munro’s departure: “It is a big team but Euan built Gars,” he said. “It is bad news as that fund has got very big. You can’t dress this up any other way than say that it is a blow….We are probably going to be suspending our buy rating.”

Mark Dampier, head of research at Hargreaves Lansdown, has removed the fund from its Wealth 150 list of favoured products because of the “significant” departure. While he admitted that GARs was not a ‘one man’ fund, he said that Munro had been the “architect” of Gars and head of the team.

It seems that the problem with the Standard Life Investments GARs fund is not that Munro has gone – it is its size, the previous departures and now this latest blow taken together collectively. Investors already nervous about the other two problems have been made more so by Munro’s departure. However, with the possible exception of the Newton Real Return fund, no rival fund is doing what is does as successfully or as reliably. It may take some time to prise investors away as a result.

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