Morningstar places seven Kames bond funds under review

Funds under review have a combined £5.2bn in assets



Morningstar has placed seven Kames bond funds under review following the mass exodus of managers from its fixed income franchise, including co-head Stephen Snowden (pictured) and three other named managers.

The total value of the affected funds is about £5.2bn.

The ratings agency said that its decision comes following “a period of significant upheaval” for the fixed income team “with heavy personnel churn across all levels of seniority and fixed-income subsectors over the past three years”.

It was announced last week that Snowden would be jumping ship, bringing with him high yield managers David Ennett and Stephen Baines and Juan Valenzuela, who co-managed sterling and global strategic bond funds. The team has since landed at Artemis.

Kames fixed income losses began last year when former co-heads David Roberts and Philip Milburn left the firm for Liontrust. Since then it has also lost head of rates John McNeill and investment grade credit analyst Paul Dilworth who departed earlier in 2018.

“Such a high level of staff instability is a concern, as the extensive experience of the portfolio managers and analysts of the team had previously been a key driver of the funds’ long-term success,” Morningstar senior manager research analyst Louise Babin said in a note on Tuesday.

Funds under review

Morningstar is reconsidering all of the funds that were co-managed by Snowden, including his £1.8bn Absolute Return Bond fund and £1.5bn Investment Grade Bond fund.

Funds placed under review Size (as at 31/10/2018)
Kames Absolute Return Bond £1.8bn
Kames High Yield Bond £683m
Kames High Yield Global Bond $182m (£142m)
Kames Investment Grade Bond £1.5bn
Kames Investment Grade Global Bond $239m (£186m)
Kames Ethical Corporate Bond £465m
Kames Sterling Corporate Bond £461m


Also, up for review are the High Yield Bond fund co-managed by Baines and Ennett and High Yield Global Bond fund run by Ennett and Jack Holmes, who was an existing co-manager on the mandate.

With the exception of the High Yield Bond fund, all the affected funds have a remaining co-manager following the recent departures. While new co-managers have been announced, Morningstar noted that “these are primarily more junior members of the team”.

Although the Kames Ethical Corporate Bond fund and Kames Sterling Corporate Bond funds were not impacted by the latest string of manager departures, they are also being placed under review, Morningstar said. Iain Buckle is a listed manager on both funds along with Euan McNeil on the ethical corporate bond mandate and Rory Sandilands on the sterling corporate bond mandate.

Morningstar joins the crop of ratings agencies that have already given the Kames fixed income funds the heave ho.

Fundcalibre decided to remove one of Snowden’s funds, Kames Investment Grade Bond, from its buy-list the day the manager departures were announced. The fund, which will be run by existing co-manager Euan McNeil and newcomer Grace Le, had been on its preferred fund list for many years.

AJ Bell scrapped Kames fixed income products from its favourite funds last year when the team’s original co-heads Roberts and Milburn left to join Liontrust.


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