Graham French, manager of M&G Global Basics Fund (GB0030932346), has stepped down from management of the fund which is now be run by Randeep Somel, who has been deputy manager since 2010. Mr French will continue to be an adviser to the fund until the end of May 2014.
His departure is the latest in series of high profile fund managers moves, including Neil Woodford's impending departure from Invesco Perpetual next year, and Richard Buxton's move from Schroders to Old Mutual.
Read more on Mr Woodford's move
Read more on what to do with Mr Woodford's funds
Due to Mr French's departure a number of analysts have downgraded or are reviewing their ratings on the fund. But the fund has been underperforming for some time: it is among the bottom 25 per cent of performers in the Global sector over one and three years, and third-quartile over three. We dropped M&G Global Basics fund from our most recent edition of the IC Top 100 Funds list because performance has not been great.
However, longer-term performance has been very strong with the fund among the top 10 performers in its sector over 10 years, while between the start of Mr French's tenure in November 2000 and September 2013, it achieved annualised returns of 10 per cent, "a fantastic return for investors during a period when the fund's average peer was unable to muster anywhere close to double-digit returns," said Oli Kettlewell analyst at Morningstar.
"Strong headwinds in the form of falling oil, gas and precious metals prices have caused Mr French to modify the structure of the Global Basics portfolio recently, with exposure to metals and mining stocks sinking below 10 per cent for the first time during his tenure, while the portfolio no longer has any exposure to the energy sector," explained Mr Kettlewell.
M&G says that there will be no change to the fund's investment objective, to identify international best in class companies with sustainable cash flows that are not dependent on a single end client or market, and which can exploit the new demands generated by global demographic and economic change. Mr Somel will continue to use Mr French's investment model of investing in various themes that aim to identify such companies, in particular tapping into changing consumption and investment patterns of the 3.5bn people in emerging economies. About 60 per cent of M&G Global Basics is exposed to this area, mostly via consumer and industrial stocks.
However, Mr Somel is expected to increase exposure to areas such as technology and services, as the consumption and investment patterns of people in emerging economies evolve. A recent addition is Microsoft, the first software company the fund has invested in. M&G said Microsoft (MSFT) fits the Global Basics approach because of a change to its business model that boosts revenue from the emerging countries of Brazil, Russia, India and China, alongside the growth of the service industries in these economies.
"It may well turn out that Mr Somel is the man to take the fund onto what M&G sees as its next stage but I think it will be become a very different fund under his management," said Darius McDermott, managing director of broker Chelsea Financial Services.
But advisers suggest that you do not withdraw from the fund just because of a manager departure, and consider your options carefully first.
Investors looking for alternatives to M&G Global Basics should check our Global equity fund recommendations in the IC Top 100 Funds list. These include Fundsmith Equity Fund (GB00B4LPDJ14) and Unicorn Mastertrust (GB0031218018), investment trusts such as Lindsell Train (LTI) and Law Debenture Corporation (LWDB).
Meanwhile, John Newlands, head of investment companies research at Brewin Dolphin, suggests Finsbury Growth & Income Trust (FGT), also an IC Top 100 Fund, on a 10-year plus view because it "places great stress upon global brands, often of lower price but mega-volume commodities like soap and soft drinks."
Mr French has worked at M&G for 25 years, and as manager of M&G Global Basics since 2000.
Mr Somel has worked in M&G's global team since he joined the company nearly nine years ago and was also appointed manager of M&G Managed Growth Fund (GB0031960700) this year, on which he has been deputy manager since 2010.
In 2008, he became dedicated analyst on the M&G Global Basics, M&G Managed Growth and the Vanguard Precious Metals & Mining funds.
M&G GLOBAL BASICS A Inc (GB0030932346) | |||
| PRICE | 654.38p | MEAN RETURN | 2.61% |
| IMA SECTOR | Global | SHARPE RATIO | 0.13 |
| FUND TYPE | Open-ended investment company | STANDARD DEVIATION | 14.97% |
| FUND SIZE | £4bn | TOTAL EXPENSE RATIO | 1.66% |
| No OF HOLDINGS | 43* | YIELD | 0.59% |
| SET-UP DATE | 12-Apr-73 | MINIMUM INVESTMENT | £500 |
| MANAGER START DATE | 17 November 2000 | MORE DETAILS | www.mandg.co.uk |
Source: Morningstar, *M&G
| 1-year cumulative total return (%) | 3-year cumulative total return (%) | 5-year cumulative total return (%) | 10-year cumulative total return (%) | |
| M&G Global Basics A Inc | 7.36 | 1.61 | 85.39 | 198.59 |
| Peer Group Average | 26.57 | 30.62 | 97.58 | 128.20 |
Morningstar as at 19 November 2013
Top 10 holdings as at 31 October 2013
| Symrise | 7.6% |
| Ansell | 5.5% |
| United Parcel Services | 5.4% |
| United Technologies | 5.1% |
| Kerry | 4.9% |
| Kirin | 4.8% |
| Scotts Miracle | 4.6% |
| Publicis | 4.4% |
| G4S | 4.3% |
| Iluka Resources | 4.2% |
Sector breakdown
| Consumer goods | 31.5% |
| Basic materials | 22.1% |
| Industrials | 18.6% |
| Consumer services | 8.8% |
| Health care | 8.2% |
| Financials | 3.5% |
| Information technology | 1.6% |
| Cash and near cash | 5.7% |
