Like it or loath it, today’s retail fund world is dominated by star fund managers and their star processes which are soon replicated in ‘me too’ vehicles.
In Hodges, LGIM had something of a pioneer – one of the first managers to truly develop the concept of strategic bond investing, but with the talent to be able to explain his process in a relatively straightforward way to less sophisticated investors.
Since launch in April 2007, the £2bn L&G Dynamic Bond Trust has returned 78% in total return terms, versus 40% from the IMA Sterling Strategic Bond sector.
“He is among the vanguard when it comes to strategic bond funds with a strong track record and if he was to move on to another fund management group I wouldn’t be surprised if he had his followers,” says John Husselbee, head of multi-asset at Liontrust.
“I shouldn’t think it is easy to run the amount of money he is running and to take on a new challenge with a smaller house wouldn’t surprise me. In terms of strategic bond funds, people have been looking for experience but also smaller funds – those things don’t naturally match together.”
From LGIM’s perspective, Hodges resignation comes at the worst possible time, having also lost Michael Canoy in December. Hodges himself has been interim manager on the funds Canoy left behind: Fixed Interest Trust, Managed Monthly Income and Sterling Income funds. These will now be handed over to the UK institutional credit team, headed by Robert Barnard-Smith.
Chelsea Financial Services was the first discount broker to act, downgrading Dynamic Bond Trust to a ‘hold’.
“Richard Hodges' resignation is a real blow to L&G. The fixed income team is well-resourced, but Richard was the stand-out manager,” says managing director Darius McDermott.
“The fund has been one of our favourites in the sector for a number of years and Richard's total return mentality was particularly attractive to bond investors who, in the current environment, are keen to preserve capital as interest rates rise.”
For Husselbee, Hodges’ departure also clouds LGIM’s future plans for its retail business.
He adds: “I have to say that I get a confused message from LGIM in terms of which way they want to go – I’m not sure whether they are really on the side of active management, or if they want to build either more passives or index-plus type products.
“Retail has never sat that well with LGIM, nor has the concept of star fund managers. At the end of the day, if you are in the retail space, that’s what you have to accept.”
