A spokesperson for Merian said that Buxton’s decision to step down corresponds with the completion of the firm’s management buyout and rebranding. “Richard remains passionate about investing and believes there are some excellent opportunities to invest in undervalued UK companies, in the current environment,” they said.
However, investors point out the star fund manager has been underperforming and that Brexit compounds the already difficult task of running a City firm.
Merian a ‘different beast’ to smaller boutiques
Because it is a larger business the chief executive will also have more strenuous regulatory duties and reporting requirements than boutique bosses, says Ryan Hughes, head of fund selection at AJ Bell.
“Merian is a big business, it’s got big plans. I think it makes sense that you have a chief executive that is 100% focused on delivering those plans whilst the fund management team is focused on delivering performance for investors.”
In contrast, Terry Smith and Crispin Odey remain at the helm of their eponymous boutiques, which are narrower in scope. Smith, based remotely in Mauritius, runs the firm’s £16bn flagship vehicle and Fundsmith Sustainable Equity fund while Crispin Odey is currently lead manager on six funds, according to Trustnet.
Hughes says: “Crispin’s business is very much his business in terms of the way the money is run, the way the investment decisions are made.
“It’s exactly the same with Terry Smith. You’ve got a very narrow product range and one particular style of investing. I think when you’ve got that, the DNA and ethos of that chief executive and fund manager can run right through your product range.”
Merian is a “slightly different beast” with products in equities, fixed income, mid and small-cap across the globe and managers based in Europe, Asia and North America, says Hughes. “Having a 100% focus on the fund with everything that’s going on in the UK with Brexit and with challenging markets, it makes sense,” he says.
Merian UK equity team’s abysmal year
Weak performance was cited by several commentators as a possible reason for Buxton’s decision. His £1.8bn UK Alpha fund is currently third quartile over one and five years compared with peers in the IA UK All Companies sector.
Since Buxton took the reins of the fund in December 2009 it has returned 110.51%, comfortably beating the IA UK All Companies sector’s return of 98.26%.
Merian UK Alpha fund performance
|3 month||6 month||1 year||3 year||5 year|
|Merian UK Alpha Fund||-5.6%||-8.3%||-9.2%||23.8%||15.4%|
|IA UK All Companies||-7.0%||-10.3%||-9.6%||20.1%||21.3%|
The UK Alpha fund’s recent underperformance would have been “a very easy stick to beat Richard with” when deciding why not to keep Buxton on as CEO, says Hughes.
Ben Yearsley, director of Shore Financial Planning, points out three of the Merian UK equity team’s funds were among the bottom 10 equity funds for 2018 after a devastating Q4. “Arguably it’s a good time for them to say, actually, let’s concentrate on the funds and get someone else to run the business.”
But Chelsea Financial Services managing director Darius McDermott says Buxton’s performance had been “pretty middle of the road” even before he became CEO.
Additonally, Buxton’s style of investing, which heavily emphasises valuations, has also been out of favour compared with aggressive, growth styles. McDermott adds: “We would generally expect, and have had from Richard over many years, better performance than we’ve seen over the last couple of years. But do I attribute it solely to him doing two roles? No, I don’t.”
He reckons combining CEO and fund manager roles is difficult but not impossible.
In the case of Smith and Odey, he reckons most of their time will be spent running money, not spearheading the business. “Most of those companies will have good people around them even if they carry a CEO title.”
Star fund manager precedents in shunning management roles
But there are plenty of boutique investors who entrust the running of their operations to others.
Neil Woodford has CEO Craig Newman who is described as “the driving force behind Woodford Investment Management” on the firm’s website, while Lindsell Train co-founders Michael Lindsell and Nick Train are led by chief executive Michael Lim.
Others juggling dual roles have made a similar choice to Buxton.
Jupiter Merlin manager John Chatfeild-Roberts abandoned his post as Jupiter’s CIO in 2015 after only five years in the role. Fellow Jupiter man Edward Bonham Carter did the reverse of Chatfeild-Roberts, dropping his career in fund management for a turn as the fund group’s CEO in 2007.
Both Chatfeild-Roberts and Bonham Carter were also struggling with the performance of their funds at the time they chose between fund management and senior management roles.
Chatfeild-Roberts denied his switch-up was related to a difficult period for his £7bn Jupiter Merlin range in an interview with Portfolio Adviser, suggesting the move was intended to give Stephen Pearson “a new challenge” and relieve his boredom on the fund management side.
Yearsley says Buxton’s exit has prompted him to double down on his view that performing the dual role was “virtually impossible”.
“I think it is actually impossible,” he rephrases. “Fund management is a full-time job especially when you’re managing a big fund and being a CEO of a 300-person fund management company is also a full-time role. It was just a case of when and which job he gave up.”