Liontrust purges look set to continue as Stephen Bailey funds wind up on the chopping block

Liontrust has purged another five small, underperforming funds from its product range, including two run by long-standing manager Stephen Bailey, leading to speculation that more changes could be coming.  

The FTSE 250 fund house announced on Friday plans to scrap its £111m European Income and £84m Macro Thematic investment teams subject to regulatory and investor approval.  

The twin team closures will see European Income and European Enhance Income duo Olly Russ and Oisin O’Leary depart the business, as well as Bailey and Jamie Clark who run the Macro Equity Income and Macro UK Growth funds.  

Russ and O’Leary’s funds will be managed by the Cashflow Solutions team before they are merged with the £115.4m European Growth fund, while Bailey and Clark’s funds will fall to the Economic Advantage team before they are rehomed in the £475.6m UK Growth fund, helmed by Anthony Cross and Julian Fosh. 

In addition, Liontrust has entered into a conditional agreement to offload its Asian Income team, headed by Mark Williams, to Somerset Capital, the emerging markets boutique co-founded by Jacob Rees-Mogg. 

Williams will become co-manager of the Somerset Emerging Markets Dividend Growth fund alongside existing senior partner Kumar Pandit from 1 November. He will be joined at Somerset by colleagues Carolyn Chan and Shashank Slava the same month. 

The non-UK domiciled GF Asian Income fund is not part of the sale and will be shuttered. 

Liontrust said the decision to scrap the teams was prompted by a review of its product range after enjoying a period of “rapid growth”. The fund house has seen its assets under management and administration balloon to £25bn after a highly acquisitive period which has seen it snap up Alliance Trust Investments’ sustainable team, Kames fixed income duo Phil Milburn and David Roberts, rival fund group Neptune and most recently Architas’ UK business.  

Expect more changes to fund ranges

The quintet of funds are the latest casualties to come out of Liontrust’s product range purge. In August the FTSE 250 listed manager merged away the £88m Liontrust UK Mid Cap and £10m Opportunities funds run by Mark Martin. The legacy Neptune funds were also combined with the Cross and Fosh-led UK Growth fund. 

AJ Bell head of active portfolios Ryan Hughes expects there will be more changes to come given how many sub £100m funds Liontrust has particularly after the Neptune purchase. “I expect them to move onto other parts of the range soon,” he said.

Of Liontrust’s remaining 44 funds, 16 have less than £100m in assets, according to data from Morningstar. Nine of these are legacy funds from Neptune, including Robin Geffen’s Global Technology and Global Smaller Companies funds, the latter of which stands at just £14.6m. 

Milburn and Roberts’ Absolute Return Bond and High Yield Bond funds, which they launched with ex-Kames colleague Donald Phillips in 2018, also feature on the list of sub £100m funds, coming in at £76.3m and £70.0m. 

Also appearing in the list is the £88.7m UK Micro Cap fund, which is run by Cross and Fosh along with Matthew Tonge and Victoria Stevens. 

Cross and Fosh’s Special Situations is currently the largest fund in Liontrust’s stable with £5.5bn in assets.  

‘Sensible tidying up of underperforming funds’

Chelsea Financial Services managing director Darius McDermott described the changes as a “sensible tidying up of a couple of underperforming funds” that will go down well with investors in the era of value for money.

“European Income and Macro Thematic had not performed well and assets under management were struggling to grow anymore,” McDermott said.  

All four funds have consistently been in the third and fourth quartile of their respective peer groups over all major time horizons. 

Bailey and Clark’s £63.8m Macro Equity Income and £20.5m Macro UK Growth funds have both handed investors a 16% loss over three years, worse than the IA UK Equity Income and UK All Companies losses of 14.4% and 7.3% respectively.  

Russ’ funds which he brought over from Argonaut Capital in 2016 have not fared much better, with European Income, the largest of the two at £85.0m, returning just 0.3% over three years versus the IA Europe ex-UK’s gains of 7.6%. 

Source: Trustnet

Willis Owen head of personal investing Adrian Lowcock views the sale of the Asian desk as a “mature” move for the business.

It is “a recognition that it is not necessarily easy or possible to cover all markets and for the group to focus on its energy on some key areas,” Lowcock said. 

“The fact they were able to sell to Somerset may be fortuitous but I think it is a good outcome as it puts that business in the hands of a specialist group,” he continued.

“The managers should settle well in the new environment and will likely benefit from the additional insight and resource they can access as well as bring their own expertise to the group.”