Legacy Neptune funds spotlighted for failing to deliver value in Liontrust assessment

Legacy Neptune funds have disproportionately featured among the funds failing to deliver value in Liontrust’s debut value assessment.  

Liontrust’s fund board concluded eight of its 41 funds or one fifth were coming up short when measured across seven categories, including performance, quality of services and charges.

The Liontrust China, European Opportunities, India, and Japan Opportunities, which are all run by Neptune managers, represented four out the six funds to receive an amber rating, meaning they require monitoring and/or minor actions to address their underlying issues.

All four were flagged by Liontrust’s fund board for falling short of their stated investment objectives and failing to beat their respective benchmarks over one, three and five years. 

Two former Neptune funds, Liontrust UK Mid Cap and Liontrust UK Opportunities, received a red rating, meaning they were “not delivering value consistently”. Both were run by Neptune manager Mark Martin and have since been merged with the UK Growth fund, managed by Anthony Cross and Julian Fosh following his departure from the business. 

During the reporting period Liontrust merged four other funds that were struggling to turn performance around, including Stephen Bailey and Jamie Clark’s Macro Equity Income and Macro UK Growth funds which both received amber ratings in the value report. 

It also sold the Asian Income fund, led by Mark Williams, to Somerset Capital. 

See also: Liontrust purges look set to continue as Stephen Bailey funds wind up on the chopping block

Rob Burnett successor flagged for underperformance

Over three years, three of the amber-rated Neptune funds have have lost investors money, according to data from Trustnet.  

The £83.7m European Opportunities fund’s losses are the most excessive with the fund losing 12.2% in three years compared with the IA Europe UK sector average of 16.9%.  

Elsewhere, the India fund has returned -8.5%, putting it well behind the IA Specialist average of 16.7%, and the Japan Opportunities fund has also floundered, delivering -6.3% return against the IA Japan sector’s 17.7% gains.

Amber rated legacy Neptune funds returns

Source: Trustnet  

Though not delivering investors a negative return, the £24.6m China fund, run by Ruth Chambers, has lagged peers in the sector, particularly on a five-year view where it has returned 99.5% against the average IA China fund’s 124.9% returns. 

However, the fund board noted in the case of the China, European Opportunities and India funds the managers had only been appointed to the mandates fairly recently. Thomas Smith took over European Opportunities in January 2019 following the exit of Neptune’s European equities heavyhitter Rob Burnett. Similarly Chambers and Ewan Thompson, who runs the £39.3m India fund, took over their mandates in 2018. 

Chris Taylor’s Japan fund stung by currency hedging

The same cannot be said for Japan Opportunities manager Chris Taylor, who has run the fund since 2005. 

In its review, the fund board said Taylor has “significantly underperformed” over the last five years versus the index and sector. Japan Opportunities has returned 19.3% compared with the IA Japan sector’s returns of 75.9%. 

But the board said this was mainly a reflection of the fund’s yen currency hedging rather than Taylor’s stock picking abilities, noting a number of his holdings have been in place for “a number of years”. Since inception it said Taylor had provided significant capital growth as well as relative outperformance versus both the index and the sector. 

“Investors are aware of the fund’s currency positioning and the fund’s total return has performed as expected based on the movements of the yen and the equity performance has been broadly in line with the market,” the Liontrust fund board said. 

But it added: “Due to the scale and length of the period of underperformance, the conclusion must be that the fund has not met investors’ expectations and should be monitored.”

Liontrust slashes fund fees

The quartet of funds were also found to have higher charges compared to peers, prompting Liontrust to cut charges and transfer investors into cheaper share classes.

The fund group said it had reduced administration fees across the China, European Opportunities and India funds by 0.13%, 0.20% and 0.22% respectively.

It also said it was in the process of transferring retail investors in legacy share classes of the China, European Opportunities, and Japan Opportunities funds into share classes with a lower OCF.

In the case of Thompson’s India fund Liontrust said it had also decided to absorb research costs previously being borne by investors.

Ten other funds, including Robin Geffen’s £340.0m Income fund and Cross and Fosh’s Special Situations fund, were also given an amber score for having comparatively higher charges.

See also: Value assessments expose ‘scandalous’ inaction over investors in legacy share classes