Speaking to Portfolio Adviser, St John (pictured) said he and Thomas are already aware of who the secondary manager on the UK Select Opportunities fund will be.
He said: “Nigel and I both came to the same conclusion independently but we just haven’t announced it yet.”
Following Thomas’s retirement announcement, investors and fund ratings agencies were concerned about St John’s ability to run a £3bn fund and Morningstar placed the fund under review.
In an update in June, Simon Dorricott, associate director at Morningstar said the fund had been downgraded from a silver rating to neutral.
St John added that while Axa IM’s restructuring plan could put up to 210 jobs at risk, the impact on portfolio managers is expected to be minimal.
Management responsibilities
Commenting on the news that Thomas and St John have selected a secondary manager, Dorricott said he does not expect any deputy manager to have a significant impact on the portfolio.
“Managers on the UK team at Axa do work together discussing ideas and attending company meetings, but in managing their funds decision-making is very clearly the responsibility of the named manager.”
Dorricott explained that the fund was downgraded because although St John has managed a mandate that is similar to UK Select Opportunities for the past two years, and the two funds show consistent sector and style biases, they have significant differences at stock level, which reflects the freedom that managers have at Axa.
“Given St John’s relatively limited experience with this type of mandate and the significantly increased assets under management he will have to manage in future, we feel the fund merits a Morningstar Analyst Rating of neutral at this time,” he added.
Chelsea Financial Services managing director Darius McDermott said: “As we saw with Chris, as deputy to Nigel, it’s not just about deputising for AXA, there is also a big element of eventual succession planning, which is probably why the company is taking their time appointing someone.”
Dorricott added the group are also looking to hire a portfolio manager to the UK team.
“Ideally this would be someone with expertise in large-cap UK stocks,” he said. “The new hire should therefore reduce the workload of the existing fund management team and increase the overall experience and knowledge of the team in terms of large-cap stock research – both of which we would view positively.”
No worries
However, St John, manager of the Axa Framlington UK Mid Cap fund and deputy manager on the UK Select Opportunities, argued that his experience working with Thomas will work in his favour.
He said: “I’ve worked with Nigel for 14 years, I sit next to him, he selected me to be the support manager. It’s quite a long period of time.
“The fund size doesn’t worry me. It depends how you manage money and I’m very similar to Nigel Thomas in that way as my investment horizon is also three to five years.”
St John said while he is aware that a growing fund of £150m-160m is different to one that is £3bn, it will make no different to how he manages clients’ money.
“Although I officially take over at the end of December, any changes in the fund being made are agreed by Nigel and me. Nigel is not managing the fund independently because it is no good making an investment now or holding things that I’m then going to sell.
“I don’t want people thinking there are two big bangs, the announcement and then the takeover. Me taking over the fund is absolutely irrelevant and is just a non-event.
He argued that aside from Thomas and himself, there is a team of eight people on the UK desk who all contribute.
Brexit underperformance
St John explained that the underperformance of the UK Select Opportunities fund could be partially due to Brexit.
He said: “The outlier year of 2016 was a very difficult year, relative to performance.
“My AWF fund outperformed the market last year but Brexit was very, very, hard for the offshore fund as it was for the UK Select Opp.
“The market basically diverged; mega caps went up and everything else went down.”
