Sanditon is winding down due to profitability concerns and handing the management of two of its strategies to Crux Asset Management highlighting the difficulties for fund houses focused on value investing.
Richard Pease and James Milne (pictured) will takeover the TM Sanditon European Fund, which will be rebranded under the Crux name. Jamie Ward will manage the TM Sanditon UK Fund, which will also be rebranded. Crux did not take on two further strategies due to them being long/short.
No changes will be made to the objectives or mandates, which will be run on a bottom-up basis. The change of the investment manager is due to take place in November.
Sanditon chief executive Rupert Tyer said they had been working with their AFM, Thesis Unit Trust Management. “Once the board of Sanditon had made the decision that they were unlikely to grow profitably over the next few years, our sole focus was to find an efficient and timely solution to ensure that investors were not disadvantaged in any way.”
Sanditon and Thesis Unit Trust Management have been in touch with investors in TM UK Select Fund and TM Euro Select Fund about alternative arrangements, a press release said.
Crux director Mark Little described the transfer of Sanditon’s funds to Crux as “a sound solution for investors given Sanditon’s decision to cease managing these funds”.
Thesis Unit Trust Management chief executive David Tyerman said both firms have “identical target markets, similar styles and culture”.
Sanditon wind-down comes a week after Woodford shuts up shop
The announcement comes less than a week after Neil Woodford announced he was closing up shop five years after launching Woodford Investment Management.
London-based Sanditon was founded in 2013 with former Cazenove duo Tim Russell and Chris Rice later joined by Julie Dean.
AJ Bell had this year highlighted disappointing performance at the boutique since the managers had gone out on their own, particularly in its absolute return strategies, which are not part of the transfer.
Russell’s long/short UK equities fund was among the top 10 worst funds in H1 this year, losing investors 7.4%. But Rice’s Sanditon European Select strategy has seen performance pick up, topping performance tables in May, the only absolute return fund to do so.
Value boutiques face difficult environment
Sanditon had not suffered any liquidity issues like Woodford faced but both employed a value approach to managing money, said Chelsea Financial Services managing director Darius McDermott. “I think you would struggle to write down a list of more than 20 UK value managers anymore.”
Sanditon had taken a business cycle approach to investing while Woodford had many contrarian bets based around Brexit.
At both firms assets reached a point where questions were raised about the viability of the firm, McDermott said.
Sanditon runs approximately half a billion while the writing was on the wall for Woodford once it lost the Equity Income Fund. The now suspended Income Focus Fund had £261m while Woodford Patient Capital Trust has net assets totalling £576.71m albeit trading at a 48% discount.
Willis Owen head of personal investing Adrian Lowcock said: “The challenges of setting up a boutique asset manager are varied and very different to those of managing a fund itself and I think in this case the business struggled to become established in the minds of investors.”
Lowcock also noted Sanditon was launched into a market which then went on to ignore value. “It just goes to show that a market style can stay out of favour for much longer than any expect and although the managers are confident value will return they cannot know when.”
