Star fund manager Richard Buxton has unexpectedly quit Schroders, where he is head of UK equities and responsible for managing the Schroder UK Alpha Plus fund.
Buxton is due to leave Schroders to join Old Mutual on 14th June, according to reports in the trade press this morning.
What does this news mean for investors in the £3.7bn Schroder UK Alpha Plus fund?
There is no denying that this has been a strongly performing fund to date.
Over the past five years, Schroder UK Alpha Plus fund returned 57.2% compared to a sector average of 37.6%. It has delivered first quartile performance over one, three and five years.
This is a fund for investors who are prepared to accept a higher risk profile than traditional UK equity funds, with a more concentrated portfolio and higher conviction ideas implemented by the manager.
Whilst waiting for an announcement on a replacement for Richard Buxton, should investors hold or fold?
One option would be to follow Buxton to Old Mutual, where he is understood to be taking on fund management responsibilities. With the details of this currently unknown, investors might not be prepared to wait.
In any case, we recommend investors are wary about exposing their assets to newly launched funds or funds with replacement fund managers, until a management style and performance track record is established.
This also counts for Buxton’s replacement at Schroders; investors could adopt the wait and see approach, but switching to another fund with an established manager is likely to be a better strategy.
There are some good alternatives out there worth considering.
Our quantitative fund research suggests a couple of funds at which investors might want to take a closer look.
We consider consistency, risk-adjusted returns and cost when analysing the entire universe of investment funds, to determine which display attractive characteristics before carrying out further qualitative investigation.
Cazenove UK Opportunities is managed by Julie Dean who has a similar tenure managing the fund to Richard Buxton.
The fund aims to achieve long-term capital growth whilst delivering an income, by investing in any economic sector of the UK market.
Dean has outperformed Buxton over the past five years, with performance of 120.74%. The £1.2bn fund has also delivered first quartile performance over one, three and five years.
Another fund to consider is Cavendish UK Select.
This fund has a much shorter track record, with manager Paul Mumford only a couple of months away from setting a three year performance track record. When this happens, we believe the fund will start to attract a lot of interest from investors.
Cavendish UK Select has delivered first quartile performance over the past year, with a return of 21.13% compared to the sector average of 15.28%.
Finally, AXA Framlington UK Select Opportunities is well rated by our quantitative research.
The £3.5bn fund, managed by the respected Nigel Thomas, aims to achieve capital growth by investing in companies, primarily of UK origin, where Thomas believes above average returns can be realised.
The performance of this fund over the past year has been a little disappointing, in the third quartile, but it retains its first quartile position over three and five years.
There are clearly some good alternatives out there to Schroder UK Alpha Plus following the news of Richard Buxton’s resignation.
Investors should make a conscious decision to stay with the fund, follow Buxton to Old Mutual or select a decent alternative. If you need advice, do get in touch.
Photo credit: Flickr/ccarlstead
