FE cuts 52 managers from alpha list

There has been a big churn of talent in FE’s latest Alpha Manager rebalance, which saw 52 managers lose their title, particularly among small cap UK equity managers.

Almost half (27) of the managers lost their FE Alpha Manager title, while 54 new managers made the list, which honours the top 10% of UK retail-facing managers based on performance throughout their entire career.

Axa Investment Management’s Chris St John was among those who lost their position, having previously faced scrutiny following the announcement that he would be taking over the Axa Framlington UK Select Opportunities fund from veteran Nigel Thomas. Although St John has now taken over the fund officially, his fund was placed under review by Morningstar last year.

Charles Younes, research manager at FE, said: “Chris St John has left the list because he has underperformed sector peers over the last year, with the main driver for his underperformance being the underperformance of mid cap strategies over the same time period.

“Alpha generation is a key component of the FE Alpha Manager rating and St John has generated less alpha than sector peers over the last twelve months also.”

Ben Russon of Franklin Templeton Investments, Henry Lowson of Royal London and Martin Turner at Miton also all departed the list.

Other well-known managers to lose their status include SW Mitchell Capital’s Stuart Mitchell, who was dropped because he is “no longer a fund manager or managing an eligible fund”.

Former River & Mercantile Asset Management fund manager Philip Rodrigs, who left the firm last year following a conduct issue, also lost his status for the same reason.

Younes noted several managers with a focus on smaller companies lost their place.

“This is reflective of the underperformance of smaller companies compared to large caps since Brexit,” he said. “Managers with a preference for smaller companies have been struggling to generate alpha across the board.”

A full list of managers who dropped off the list is below.

New entrants

In total, 200 managers scooped an FE Alpha Manager rating in 2019.

Of the 54 new entrants, 38 have never previously been awarded an FE Alpha Manager rating, such as Bryan Collins of Fidelity, Jack Barrat of Man GLG and JP Morgan Asset Management’s James Elliot.

Chris Field, James de Uphaugh and Matthew Smith of Majedie Asset Management’s UK equity desk all joined the shortlist.

Rob Gleeson, head of research at FE, said: “The FE Alpha Manager rating allows us to take a step back and remove short-term market movements or cyclical factors from the analysis.

“Given the market conditions of recent years, partly down to ongoing Brexit uncertainty, it is fundamental that fund managers can add value over the very long term and ride the challenges the market throws at them. The FE Alpha Manager ratings enable us to separate those managers that can and cannot do this.”

Top fund groups

Blackrock has risen to the top of the groups this time around with 10 FE Alpha Managers, up from six a year ago. Fidelity, who were group winners last year, dropped to second place with nine FE Alpha Managers  ̶  down from 10 last year.

Comgest Asset Management shared fourth place with M&G Investments with seven new entrants. This year is the first Comgest’s managers have been eligible for a rating following their funds being made eligible for sale in the UK.

Top groups by number of FE Alpha managers

Winning sectors

The sector with the highest percentage of FE Alpha Managers (57%) is IA Japanese Smaller Companies, knocking the winner of the last two years, IA Smaller Companies, down to second place with 47%.

IA UK Index Linked Gilts scored just one FE Alpha Manager rating, while no managers from the IA Short Term Money Market, IA UK Direct Property and IA Volatility Managed sectors received a rating.

Gleeson added: “The volatility in 2018 has had an impact on these figures, even with the long-term focus of the rating. It’s not surprising that sectors that typically have a high average active share have the most FE Alpha Managers, as there was opportunity for the right active strategy to do very well through this period.”

Managers to drop off the list