Aberdeen Standard Investments has singled out a trio of funds with collective assets of £1.8bn for underperformance in its first value assessment.
The Standard Life UK Equity, North American and European trusts each got a cross against their name for performance in the five-page document, which has been required from the Financial Conduct Authority since January 2020.
They received a pass mark for service, which covers oversight and customer sentiment, and costs.
Sixteen other funds assessed in the value assessment were deemed satisfactory across each component. While the FCA had asked fund boards to cover AFM costs, economies of scale, comparable market rates, comparable services and classes of unit, the fund board grouped these together in one category it titled costs.
Fund boards face a tougher task second time round
In response to each of the underperforming funds, the fund board said it would “closely monitor the fund’s progress and expect to see an improvement in results”. “We will take remedial action where necessary.”
AJ Bell head of active portfolios Ryan Hughes said investors could be 12 months from seeing the real impact that value assessments can bring.
“These funds have been consistent long-term underperformers and therefore it is right that they have been flagged in the value assessments as not delivering on their performance objectives,” Hughes said.
But he added: “In many respects, highlighting this problem is the easy bit for the firm. The challenge will come next year when they have to re-assess again and find they are still underperforming.”
The report card for the underperforming funds
The £1.1bn Standard Life UK Equity General Trust, managed by Guy Douthwaite since 2018, was the largest fund singled out in the value assessment published by the Standard Life Trust Management fund board.
The fund underperformed the FTSE All Share benchmark over a rolling three-year measurement by 1.18% per annum, the board said. It had also failed to meet a performance target of 2% per annum.
Standard Life UK Equity Trust performance versus its sector
| 6m | 1yr | 3yr | 5yr | |
| Standard Life UK Equity General | 9.03 | 8.48 | 13.47 | 25.45 |
| IA UK All Companies sector | 11.32 | 14.24 | 20.36 | 37.51 |
Source: FE Fundinfo (to 12 February 2020)
The board also singled out the £383.2m Standard Life North American and £282.7m Standard Life European trusts for underperformance.
Brian Fox has been a fund manager on the North American fund since November 2018. Over a rolling three-year period it had underperformed the S&P 500 by -2.12% per annum.
The European fund had underperformed the FTSE World Europe ex UK over a three-year rolling period by -2.30% per annum.
Both funds had also failed to meet their performance target of +2% per annum.
Standard Life European Trust performance versus its sector
| 6m | 1yr | 3yr | 5yr | |
| Standard Life TM North American | 8.10 | 24.99 | 38.19 | 90.41 |
| IA North America sector | 7.16 | 20.51 | 40.82 | 89.56 |
Source: FE Fundinfo (to 12 February 2020)
Stock selection was blamed for underperformance in each case, although the fund board did not go into specifics.
On the UK Equity fund, the fund board said: “A sharp deterioration in investor sentiment in Q4 2018 negatively impacted fund returns. Further to this, a small number of individual holdings were detrimental to performance.”
In the case of the teams behind the North American and European funds, the fund board noted both had seen an improvement in resources and access to research. It said performance had shown signs of improving in both cases.
For each underperforming fund, the board said the investment manager retained a “high degree of confidence in the team and investment process and believes the current portfolio strategy has the potential to deliver the targeted level of performance over longer-time horizons and going forward”.
