Trusts to Merge, ETF Launches and Manager Exits

NEWS YOU CAN USE: This month - two small cap trusts to merge, two fund manager resignations, fees cut on ETFs and active and passive fund launches

Emma Simon 29 June, 2018 | 2:19PM

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This month has seen the launch of two new active funds, and a flurry of new ETF options for investors. Competition in the ETF market is clearly increasing, with one major provider cutting fees this month on a number of its core ETF holdings.

The investment trust industry has also had a busy June; one of the sector’s more successful trusts in recent years has raised additional funds to boost its gearing, while two smaller company trusts have merged. There have also been a number of high profile manager moves, with departures from both F&C and L&G funds.

Smaller Companies Trusts to Merge

Dunedin Smaller Companies (DNDL) investment trust has agreed to merge with Standard Life UK Smaller Companies (SLS) trust.

This decision follows a review of investment vehicles after the merger of Aberdeen Asset Management and Standard Life Investments last year.

Both trusts are highly-rated. Standard Life UK Smaller Companies, managed by Harry Nimmo, has a Gold Rating from Morningstar analysts. The Dunedin trust has a Bronze Rating.

The combined trust will be more than £500 million in size and will be managed according to Nimmo’s process.

F&C UK Equity Manager Resigns

Tom Wilson who runs the F&C UK Mid Cap fund and the F&C UK Alpha fund for BDO Asset Management has resigned from the business. Wilson has been the lead manager on these two funds for the past three years, having joined BDO more than a decade ago.

The Alpha fund has underperformed its sector in recent years, and Wilson was in the process of handing management of this fund over to David Moss, co-head of global equities at the investment house. However, the UK Mid Cap fund has been a better performer.

Commenting on the departure, Darius McDermott, managing director of Chelsea Financial Services says: “It’s a real shame as Wilson has just marked his third anniversary managing the UK Mid Cap fund, which has done extremely well, outperforming the sector average and most of his peers by a considerable margin.” It has yet to be announced where Wilson will move to.

Manager Change at M&G

M&G has announced that Matthew Vaight manager of the M&G Global Emerging Markets fund will leave the company at the end of the year to pursue interests outside of the asset management industry. Vaight has been at M&G for 22 years and launched this fund in 2009.

After his departure, Michael Bourke will take over as lead manager on the fund.

Bourke currently manages the Emerging Markets Income Opportunities fund for M&G and has 18 years investment experience, previously working as an emerging markets analyst and portfolio manager at Legg Mason and FPP Asset Management.

M&G said there would be no change in the investment philosophy of the fund.

Schroders Launches New China Fund

Schroders has launched a new China fund, focused on onshore equities in China. The fund will have a growth remit and invest in onshore A-shares through the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect.

Managers of this Schroder ISF China A-Share fund say it will primarily focus on small to mid-cap stocks and will take an active bottom-up approach to find the best opportunities.

The fund will be managed by Schroders’ Asian equities team, lead by Jack Lee.

Rathbones to Launch New Sustainability Fund

Rathbone has announced plans to launch a global multi-cap sustainability fund at the end of July.

The fund will be managed by David Harrison, who joined the firm in 2014. He will be supported by Rathbone Greenbank Investments, the firm’s ethical investment division.

He confirmed that the fund will invest in a concentrated portfolio of 30 to 50 stocks and will aim to deliver a total return in excess of the FTSE World Index.

The fund manager said they will invest in companies whose activities support the attainment of the UN Sustainable Development Goals.

BlackRock Reduces ETF Charges

BlackRock iShares has cut the fees on four of its leading ETF products, all of which have more than €1 billion under management. Its iShares MSCI Europe ETF has seen its ongoing charges figure cut from 0.35% to just 0.12%. There is a similar reduction to its iShare MSCI EMU ETF. This will now also have an fee of 0.12%, down from 0.33%.

Elsewhere, its €4.8 billion iShare Euro Stoxx50 ETF as seen charges cut from 0.16% to 0.1%; while the €10.1 billion iShares MSCI EM IMI EFT has seen charges reduced from 0.25% to 0.18%.

In recent months both Lyxor and Vanguard have reduced charges on many of their own ETF products.

First Trust Global Launches ‘Internet’ ETF

First Trust Global Portfolios has launched a new internet-themed ETF which will track the performance of 40 internet-related stocks, including the so-called FANG stocks:  Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google, which is listed as Alphabet (GOOGL).

This ETF will track the Dow Jones internet composite index and have a total expense ratio of 0.55%.

First Global has previously launched a range of tech-focused ETF products, including Europe’s first blockchain ETF.

Invesco Launches Saudi Arabia ETF

There was another innovative ETF launch this month with Invesco launching the first Saudi Arabia ETF in Europe. This ETF, which is listed on the London market will track the 22 large and mid-cap companies that make up the Saudi Arabia 20/35.

The ETF will have a TER of 0.5%. In a statement Invesco says it believes the country “is in the early stages of an exciting transformation”, with a current reform programme designed to reduce the economy’s dependency on government funding and oil exports.

Scottish Mortgage Increases Gearing

Gold-medal rated Scottish Mortgage (SMT) has raised a further £170 million to increase the gearing facilities on its investment trust. The trust is run by Baillie Gifford’s James Anderson and Tom Slater.

The board pointed out that in recent years the relative level of gearing had fallen, thanks to asset growth. According to Morningstar data the trust is currently trading at a 4.9% premium. Over the past five years it has delivered an average return of 27.8% a year.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Dunedin Smaller Companies Ord  -
F&C UK Alpha 13,102.56 GBP1.36
F&C UK Mid-Cap 1155.34 GBP1.53
M&G Global Emerging Markets GBP I Acc290.27 GBP1.23
Scottish Mortgage Ord493.15 GBX0.35
Standard Life UK Smaller Co. Ord409.00 GBX-0.24

About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk