Star fund manager quits Liontrust

Boutique fund management firm Liontrust has announced the shock resignation of star fund managers Jeremy Lang and William Pattison, who manage the company's biggest funds. The announcement is a blow for investors in the funds, who now have to decide whether to stay with the company or move money elsewhere.

The good news for investors is that there is no need to jump to a snap decision. Liontrust said that the managers, who are also directors of the firm, will remain at the group until 11 January next year "in order to ensure an orderly hand-over of their functions and responsibilities".

Mr Lang runs the Liontrust First Growth Fund and First Income fund. Mr Pattison manages Liontrust's First Large Cap fund. Fund managers in boutique funds such as Liontrust are not known for their tendency to move around. In fact, boutiques are often recommended because managers have stakes in the business and are therefore unlikely to jump ship for a bigger salary at a rival firm.

The typical response to a manager move is to wait and see who the next fund manager is before making a decision whether to move money. Moving funds can be costly as it incurs exit fees - and then entry fees on the new fund. Liontrust will be keen to appoint talented successors, but it may be several months before an announcement is made.

However, several financial advisers who closely identify Liontrust with Mr Lang - some nickname it 'Langtrust' - have suspended his funds from their buy lists.

Darius McDermott, managing director of Chelsea Financial Services, calls the news "astounding". He says: "Mr Lang and Mr Pattisson are part of Liontrust's DNA; their signature investment process has not only become the sacred writ of the company's approach to asset management, but commanded the faith of the IFA community and institutional consultants. What to many in the industry has become 'Langtrust' will be no more."

The news must be put in context - Mr Lang's once legendary performance has stumbled badly in recent years. His Liontrust First Income Fund is managed in accordance with his respected UK equity income investment process, which he calls The Value Dynamic. It invests in a portfolio of 50-80 stocks from throughout the FTSE All-Share Index with unusually high dividend yields on account of over-pessimism by other investors. Although it has posted 12 years of rising dividends, Liontrust First Income fund has been a high-profile underperformer for the fourth year running in 2008.

Investors looking to jump ship have plenty of alternatives as the equity income fund sector is huge. Chelsea recommends Artemis Income and Invesco Perpetual High Income.

Also, as we pointed out earlier this month, there are a raft of global equity income funds entering the market, offering further diversification for your portfolio. One fund manager with a good track record in this field is Pramit Ghose, manager of the Elite Bloxham Global Equity Income fund. He has been increasing exposure to the US since the summer of 2008, taking the fund's total US holdings to 33 per cent and broadly reflecting a view that the world's biggest economy will start to recover towards the end of 2009. Key US holdings to date are Johnson & Johnson, AT&T, Lockheed Martin, Microsoft and PepsiCo.

Key fund data:

Source: FT.com, *Morningstar

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