August proved to be a testing month for investors. Not for the first time, thinner trading during the summer months has helped to exaggerate stock market movements. So a sell-off in Asian markets, prompted by poor economic figures from China, led to a significant corrections in the US, UK and European markets.
The question for investors is whether this volatility is simply part and parcel of normal trading conditions, or whether it signals the start of more significant market upheaval - along the lines of the global financial crisis or dot com crash.
Opinion is divided amongst fund managers, advisers and other experts - but for now many are recommending caution, particularly with commodity stocks and funds, which bore the brunt of the sell-off in the UK.
New Woodford Shares
Many investors will welcome the fact that Woodford Patient Capital Trust (WPCT), the investment trust launched by the formidable Neil Woodford earlier this year, is to make new shares available via a ‘tap issuance’.
This move obviously benefits those who’ve yet to buy shares in this investment trust, which was launched in April. The announcement caused share prices to fall by 3%; prior to this they were trading on a double-digit premium.
Initially this sounds like bad news for existing investors, as this new share issuance - 4 million were initially launched priced at 115.7p each - will dilute the value of their holdings.
Those looking to make a quick profit on the premium have certainly lost out a little. But most will be long term investors. By taking steps to manage the share price premium, this step should protect against sudden shocks at a later stage where premiums can quickly evaporate.
The tap issuance allows shares worth 10% of the value of the trust to be issued over the next few years.
Fund Manager Moves
Elsewhere August was a month where several ailing funds aimed to revive their fortunes – or possibly stop the rot – by announcing manager changes.
M&G announced that Dave Fishwick will replace Randeep Somel as manager of its £881 million Managed Growth Fund. It said this fund manager move won’t lead to any change in the fund’s investment objectives – i.e. it will continue to its focus on equity investments.
This Managed Growth fund has underperformed in recent years, losing 0.04% over three years, compared to an average return of 20.46% in its ‘flexible investment’ sector.
This move has been welcomed by investment advisers who praised Fishwick’s track record - he has led M&G’s multi-asset team for the past 17 years.
The move may also revive the disappointing performance of M&G’s Global Basics Fund. This fund – worth some £2.2 billion – has also been a perennial under performer, and recently made it onto Tilney Bestinvest’s list of ‘dog funds’. Somel will now focus solely on his fund with a view of improving returns for its investors.
Changes to US Funds
Elsewhere, Aditja Khowala takes on the management of Fidelity American fund with effect from today. He currently also runs the company’s offshore American Growth fund.
It’s current manager, Peter Kaye, is leaving the company by mutual consent after less than three years with the company. Over this period the fund has underperformed, although it has still delivered positive returns for investors. Investors have received a 42% return over this period, compared to a growth in the S&P 500 of 47%.
For investors in this fund this is likely to lead to a change in investment strategy. Khowala will use the same approach that his does with the American Growth fund: he aims to identify long-term sector grow trends - and aims to invest in companies which has the ability to raise prices without affecting demand for their product or services.
In contrast Kaye aimed to invest in ‘turnaround’ stocks that were still viewed negatively by the market.
Fund Manager Takes Company Top Spot
Richard Buxton, has taken on the CEO role at Old Mutual Global Investors. Buxton was poached from Schroders two years ago - where he had built up a reputation for being a ‘star’ fund manager who took a more contrarian approach to stock picking.
His move to Old Mutual helped the fund manager increase the inflows of money from private investors - many of were keen to follow Buxton. It remains to be whether his promotion will enable him to boost the performance of other funds in the group - or whether it will have a more negative effect on his own funds.
Mark Dampier of Hargreaves Landsown pointed out that similar appointments in the past have not always proved successful. However Adrian Lowcock, head of investing at AxaWealth pointed out that he has experience running a large team of fund managers so should be able to help spread the success of the Old Mutual’s UK team across the rest of the company.
Buxton’s replaces Julian Ide, who has left the company.
