Renowned Asian equity manager Angus Tulloch is stepping down from IC Top 100 Fund Stewart Investors Asia Pacific Leaders (GB0033874768), formerly known as First State Asia Pacific Leaders, as part of a wider series of management changes at the company. The fund will be co-managed by David Gait and Sashi Reddy, who also continue as co-managers of another IC Top 100 Fund, Pacific Assets Trust (PAC). The changes follows First State Investments' split into two teams earlier this year, with the one that runs Stewart Investors Asia Pacific Leaders based in Edinburgh and now known as Stewart Investors.
Mr Gait was appointed co-manager of Asia Pacific Leaders earlier this year, replacing Richard Jones. He is due to hand over lead management of the Stewart Investors Worldwide Sustainability (GB00B7W30613) and Colonial First State Wholesale Worldwide Sustainability funds to Nick Edgerton, although continue as their co-manager. As a result, Jason Hollands, managing director at Tilney Bestinvest, says investors should not be concerned about Mr Gait having stretched commitments.
Mr Gait has a strong record with Pacific Assets Trust, beating MSCI AC Asia Pacific ex Japan Index over one, three and five years, and all its sector peers over three and five.
Performance of Pacific Assets Trust
| 1-year share price return (%) | 3-year cumulative share price return (%) | 5-year cumulative share price return (%) | |
|---|---|---|---|
| Pacific Assets Trust | 3 | 50 | 65 |
| MSCI AC Asia Pacific ex Japan Index | -3 | 10 | 9 |
| Asia Pacific - Ex Japan trusts average | -2 | 17 | 16 |
Source: Winterflood as at 9 November 2015
Mr Reddy, along with the sustainable funds team, is also taking on Stewart Investors Worldwide Leaders (GB0030978729), Stewart Investors MPF Global Equity and Colonial First State Wholesale Worldwide Leaders funds.
The management changes will take place over the next nine months and Mr Tulloch will work with Mr Gait and Mr Reddy during the transition. After that he will continue to be a member of the wider investment team and co-manager of the soft closed Stewart Investors Asia Pacific Fund (GB0030183890), although he has turned 65.
Stewart Investors asserts that its culture, philosophy and processes are unchanged, with the focus remaining on quality companies at reasonable valuations which exhibit strong stewardship principles. It also emphasises its team approach. However, over the long term, Stewart Investors Asia Pacific Leaders will follow a sustainability investment strategy similar to Stewart Investors Asia Pacific Sustainability Fund (GB00B0TY6S22), which Mr Gait and Mr Reddy also run, subject to regulatory and shareholder approval.
Asia Pacific Sustainability Fund invests in companies that should benefit from and contribute to the sustainable development of the countries in which they operate. It has beaten the MSCI AC Asia Ex Japan Index, the Investment Association Asia Pacific Excluding Japan sector average and Stewart Investors Asia Pacific Leaders Fund over three and five years.
Almost half of these two funds' portfolios already overlap in terms of value and holdings, and this should rise to more than three quarters. But Stewart Investors Asia Pacific Leaders will continue not to invest in companies with a market cap under $1.5bn - unlike Stewart Investors Asia Pacific Sustainability.
All Stewart Investors' funds already look to integrate environmental, social and governance considerations into investment decisions, but the sustainability funds take this one step further by focusing on long-term sustainability themes.
Performance of Stewart Investors funds
| 1-year total return (%) | 3-year cumulative total return (%) | 5-year cumulative total return (%) | 10-year cumulative total return (%) | |
|---|---|---|---|---|
| Stewart Investors Asia Pacific Leaders B Acc GBP | 3.3 | 24.2 | 44.1 | 261.4 |
| Stewart Investors Asia Pacific Sustainability A Acc GBP | 0.1 | 33.4 | 57.0 | NA |
| IA Asia Pacific Excluding Japan sector average | -1.7 | 12.2 | 9.2 | 138.3 |
| MSCI AC Asia Ex Japan NR EUR Index | 0.2 | 14.6 | 10.6 | 155.7 |
Source: Morningstar as at 6 November 2015
Analyst views
We asked a number of analysts who earlier this year suggested Stewart Investors Asia Pacific Leaders as an IC Top 100 Fund what their view is now that Mr Tulloch is not going to run it. No one suggested selling it, but some feel they need to find out more before they can say to investors whether to put new money into the fund. Their responses are as follows:
| Adrian Lowcock, AXA Wealth | Buy |
| Darius McDermott, FundCalibre | Hold |
| Jason Hollands, Tilney Bestinvest | Buy |
| Gavin Haynes, Whitechurch Securities | Buy |
| Stephen Peters, Charles Stanley | Hold |
| Alan Adam, Alan Steel Asset Management | Hold |
| Rob Pemberton, HFM Columbus | Hold |
As a result of the changes, research company FundCalibre has removed its Elite Rating on Stewart Investors Asia Pacific Leaders.
"We fully appreciate that the investment style and philosophy of the funds will not be changing, and they have a team-based process, but all managers do things slightly differently," says Darius McDermott, managing director of FundCalibre. "David Gait has an outstanding track record on the Elite Rated Asia Pacific Sustainability fund. However, there is a question mark as to whether he can translate the sustainable investment process from what is currently a small and mid-cap fund to Asia Pacific Leaders which is an all-cap fund."
Morningstar has suspended its silver rating on the fund. Its analysts state: "Although the managers will be following the approach used on their all-cap mandate, we need to assess its potential impact on this larger-cap mandate and any amendments that will be required."
Tilney Bestinvest's Mr Hollands says: "Mr Tulloch has an identifiable track record of over 27 years, the longest of any manager, with blistering outperformance over multiple timescales. His Asia Pacific Leaders fund's performance has justified every penny of the fees investors have paid. In recent times, his inherently cautious approach has served investors well during a turbulent period for Asian markets with his funds holding little in China, instead being heavily invested in India.
"Manager changes should always prompt investors to reflect on whether they need to revaluate the case for holding a fund, but there really is no need for a knee-jerk reaction. The firm has set out a long transition period and Mr Tulloch will still remain a member of the team as he winds down a successful career. The team-based approach and strong record of David Gait should provide investors with a high degree of comfort."
