Angus Tulloch has been one of the best-performing and most high profile managers of emerging market equities in recent years and, as such, the news that he is to step down from day-to-day management of many of his funds has created a dilemma.
Investors are rightly nervous that the top-tier returns for which Tulloch and his team have been responsible may waver under the new management structure. The £8bn Stewart Investors Asia Pacific Leaders is top quartile over one and three years. The £703m Stewart Investors Asia Pacific fund has a similarly impressive track record. Equally, the performance of funds over which Tulloch has ‘influence’ if not direct control, have also been strong – the Asia Pacific Sustainability fund, for example. The history of fund management is littered with teams that have not been able to replicate performance once a skilled leader has departed.
However, it should be said that in Tulloch’s case, he has some talented deputies. The performance of the Sustainability fund under David Gait has been the strongest relative to its peers of any fund in the group. It is a much smaller fund, but Gait would certainly have a claim to being as effective a manager. Equally, the process is well-established, Tulloch will remain involved and the team has been together a long time, which would suggest that it may be able to sustain performance.
That said, a number of fund rating groups have concluded that it is better to suspend the ratings pending a meeting with the new managers. For example, Simon Dorricott, senior manager research analyst at Morningstar, said: “Although the new lead manager will be following the tried and tested First State investment approach, there is some flexibility within that for managers to express their own views in terms of stock selection, which will of course have an impact on fund positioning and performance. We will meet the new manager in due course to more fully understand his investment style and to further assess the changes within Stewart Investors. Pending that meeting we have placed the Stewart Investors Asia Pacific fund Under Review.
Jonathan Asante stepping down from the Global Emerging Markets Leaders fund adds another wrinkle. The fund has not been as strong a relative performer as the rest of the range, though the five year figures and beyond are still good. Dorricott has also suspended the silver Morningstar rating for this fund. The fund will now be managed by Tom Prew, who, having been at First State since 2006, has been schooled in the process.