Investors are “fearful” for the future at Neptune following the departure of one of its most senior fund managers.
News broke on Monday afternoon that Rob Burnett (pictured) would be exiting after 16 years at the fund group to set up his own business.
The firm confirmed that Burnett will stay until the end of the year at which point Latam manager Thomas Smith will take over the £330m European Opportunities fund.
“It’s another blow for Neptune,” said Chelsea Financial Services managing director Darius McDermott. “The amount of managers they’ve lost over the last couple of years is not good”.
Burnett is the second major manager to depart the firm this year. In March it lost Indian equities manager Kunal Desai who left to join Mark Mobius’ new emerging markets venture.
Neptune also lost Felix Wintle who like Burnett left to set up his own firm with ex-M&G manager Alex Odd. Since his departure Neptune has been unable to find a US equities head to replace Wintle, going through five managers in the space of two years.
Not on my buy-list
The spate of manager departures has made fund buyers warier of investing their clients’ capital in Neptune funds.
“You start to be fearful for the long-term future of Neptune,” said Ben Yearsley, director of Shore Financial Planning.
Yearsley said Burnett’s European Opportunities fund was one of the “two to three saleable funds” at Neptune, alongside Mark Martin’s £342m UK Midcap fund and co-founder Robin Geffen’s £198m UK equity income fund.
While he admires Geffen and CIO James Dowey and respects that the firm is prepared to take contrarian positions and “think differently”, he said it is too unstable to invest in any of the funds.
Yearsley said prospective investors will want to see “a period of stability”, at least 12 months in which there are no departures, before considering whether to buy their funds again.
“Without that hand on heart you couldn’t buy their funds,” he said.
Yearsley currently has no Neptune funds on his buy-list although he said he is personally invested in Geffen’s Neptune Russia fund.
Odd mix of funds
One source told Portfolio Adviser that the decision to install a lower-profile emerging markets manager on a European equities mandate clearly shows there’s nobody left at the firm.
“The people they’re promoting no one has ever heard of,” Yearsley agreed. “It’s not a bad thing, it’s just a problem.”
“It’s an odd mix of funds for a manager to have,” McDermott reflected on the decision to promote Smith to the Neptune European Opportunities mandate.
Ryan Hughes, head of active portfolio investments at AJ Bell, said he would not be comfortable with a manager running a LatAm fund and an India fund on top of a developed markets European fund.
“They are distinctly different areas,” said Hughes. “You need to be on top of your companies, you need to be in the region visiting companies and understanding their economic environment, the political environment what companies on the ground are telling you.
“And whilst he may well be a very talented manager, trying to spread yourself across those three distinctly different regions I think would be a challenge for anybody.”
Neptune said in a statement on Monday that it had promoted Smith as Burnett’s successor because of his “outstanding long-term track record over many years in Latin America” where it said he has “consistently been the top fund manager with the Neptune Latin America Fund”.
It said that taking on Europe would give Smith a different context in which to apply his “highly replicable multi-country investment approach” which has previously delivered “a phenomenal combination of alpha generation and drawdown management” for his Latam fund.
Spoilt for choice
Yearsley and Hughes both said they have never met Burnett’s replacement Smith.
McDermott has met him once before and said “he seemed perfectly capable”.
“But his fund is not one on my must-buy list,” said McDermott, noting that there are better choices in both emerging markets and European equities.
Hughes agrees there are other plenty of other European equities managers with good track records who have been in their roles for a long time.
He said Smith doesn’t stack up to someone like Crux’s Richard Pease who has spent his entire career investing in European companies.
“For me when you’ve got a comparison like that it’s a very clear choice that I should focus on that person who has got decades of experience and is not distracted by other responsibilities.”
