CRUX to take over Sanditon funds following wind up plans

TM Sanditon European (GB00BNY7YK59) will be renamed TM Crux European Opportunities and be managed by Richard Pease, James Milne and Roland Grender. Crux said that the fund’s investment objectives will remain the same. It aims for growth by mainly investing in equities listed in Europe excluding the UK, aiming for returns of 2 per cent a year in excess of FTSE World Europe ex-UK Index over a rolling three-year period. However, it has underperformed this index over one-, three- and five-year cumulative periods. 

Mr Pease and James Milne run funds including TM Crux European Special Situations (GB00BTJRQ064), which has an excellent long-term performance record, and TM Crux European (GB00BYQJX435). Mr Pease is a highly regarded European equities manager with over three decades of investment experience who has worked at asset managers including Crux, Henderson Global Investors, New Star and Jupiter.

However, he and co-manager James Milne run their funds according to a growth investment style, whereas TM Sanditon European’s current manager, Chris Rice, invests via more of a value style – buying assets that appear to trade for less than their value. Mr Rice also tends to focus on larger companies but TM Crux European Special Situations, in particular, has a mid-cap focus.

“Richard Pease has an excellent long-term record, but he [and Mr Milne] have a different investment style to Sanditon’s managers, which is more value,” says Darius McDermott, managing director of Chelsea Financial Services. “But the fund is going to another Europe manager with an excellent long-term track record, so there may be a significant improvement. I would still expect outperformance over the long term and would stick with the Sanditon funds for now."

Crux said that TM Sanditon European will be run as an independent portfolio in its own right, but over the next few months they will seek to identify the best solution for it and is consulting with existing investors. Possible options include merging it with one of Crux's European funds.

TM Sanditon UK (GB00BXRTP273) will be renamed TM Crux UK Opportunities and be managed by Jamie Ward, who also runs TM Crux UK (GB00B5839S67). Crux said that TM Sanditon UK’s investment objectives won’t change. This fund aims for growth by investing in UK-listed equities, looking to make returns of 2 per cent a year in excess of the FTSE All-Share Index over a rolling three-year period. But it has underperformed this index over one- and three-year cumulative periods.

“TM Sanditon UK, which is currently run by Julie Ward, is comparable to TM Sanditon UK in many ways,” said Mark Little, director of Crux Asset Management. “It may make sense down the line to merge them, but we are in no rush. We will work with existing investors [on what to do].”

Crux said that the annual management fees on the Sanditon funds would not change and there would be no negative impact on their investors in terms of charges. At present, TM Sanditon European’s F share class has an ongoing charge of 0.78 per cent and TM Sanditon UK’s F share class has an ongoing charge of 0.77 per cent.

TM Crux European Special Situations’ I share class has an ongoing charge of 0.87 per cent, TM Crux European’s I share class has an ongoing charge of 0.93 per cent and TM Crux UK's B share class has an ongoing charge of 0.93 per cent.

TM Sanditon UK Select (GB00BTC2N411) and TM Sanditon European Select (GB00BNY7Y946), Targeted Absolute Return funds currently run by Tim Russell and Mr Rice, respectively, will initially be transferred to Thesis Asset Management which could continue to run them in the same way. However, Thesis is consulting with the investors in the funds on possible solutions.

Orderly closure

Sanditon Asset Management is profitable but its directors have decided to wind up the business because they are not so certain on future prospects.

“Once the board of Sanditon had made the decision that [the funds] 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,” explained Rupert Tyer, chief executive of Sanditon Asset Management. “We articulated a very clear investment strategy [value] but, particularly this year, it has been increasingly clear that there is not a lot of appetite for a value focus. A key question we asked ourselves was, even if [the funds'] performance [gets] better and value comes in our direction – will we substantially change the fortunes of our business? And although it has been a better period [for the funds’ performance] over the last few months we think that it will still not result in a material shift in the way people look at [this style of investing]. So we think that it is far better to wind up now when we are still in control – profitable, with assets under management worth about £500m. We also run very liquid funds – the investors in them could redeem their holdings at any point. We would not want to close down after having [stopped investors taking their money out of] the funds.”

TM Sanditon European and TM Sanditon UK had not been beating their benchmarks and Mr Tyer said that this was part of the reason for closing the business. However, this could in part be due to their value investment style which has not done well over the past decade but in recent months has shown signs of starting to turn around. 

But Mr Tyer said: “We have been pursuing the same strategy for the past five years and on a relative basis have mostly underperformed, but in recent months performance has been better. However, [there is] less appetite for value investments, and even if there was [an improvement in performance we] couldn’t convince ourselves that this would mean a significant turnaround in growth prospects for the business.”