Standard Life's £14bn GARS Fund Under Review

Fund analysts have placed the £14 billion Standard Life GARS fund under review following the announcement that manager Guy Stern has decided to retire

Emma Wall 9 November, 2018 | 9:44AM
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Standard Life GARS under review following manager retirement

Fund analysts have placed the £14 billion Standard Life GARS fund under review following the announcement that manager Guy Stern has decided to retire. Stern will be replaced by Aymeric Forest as Global Head of Multi-Asset Investing.

Stern retires after more than a decade at Aberdeen Standard, and more than 35 in the industry. He will step down in 2019.

Aymeric was previously Head of Multi-Asset for Schroders. The managers will work alongside one another in a handover starting February 2019 to “ensure a seamless transition for clients”. 

It has been stated that there will be no changes to portfolio responsibilities, process, team or leadership before that time. 

While GARS' longer term track record, and promise of absolute returns through the market cycle, attracted significant investment from both private and professional investors, the fund has recently been plagued by underperformance and significant outflows. In 2017, the fund saw outflows of more than £5 billion. The 10 year annualised return is 4.62%, but over shorter periods the fund is in negative territory.

Keith Skeoch, co-CEO of Aberdeen Standard said: “As a long-standing member of our team Guy has been instrumental in growing Standard Life Investments into a market leading asset manager and, more recently, in helping us to develop and structure Aberdeen Standard Investments.”

The fund is currently Under Review as Morningstar fund analysts assess Guy Stern’s retirement and senior changes that will take place.

Jonathan Miller, director of manager research for Morningstar UK said: “GARS is a good choice for investors seeking a time-tested multi-strategy offering. It’s the longest-running of the UCITS regulated multi-strategy offerings in the UK and is supported by SLI’s well-resourced multi-asset team.”

Analyst View

The investment process has changed little over the 12 years that SLI’s multi-asset team has run GARS, and Morningstar fund analysts like this consistency. From inception of the process in 2005, and its application to SLI’s in-house pension fund, the process was dialled up a bit for launch of the U.K. retail offering in 2008, but without changing the key characteristics of the approach: It can take advantage of ideas anywhere in the world, in any asset class accessible by liquid securities, and with the flexibility to leverage low risk-return ideas or hedge more volatile ones.

The portfolio includes only ideas that SLI’s multi-asset investing team has conviction in, and each one is sized according to its contribution to risk rather than the more traditional approach of under/overweighting versus a benchmark index. 

The fund remains well below its Libor plus 5% target after a very disappointing performance in 2016. The loss in that year was not attributable to any single position, and overall volatility has stayed at the lower end of the target 4%-8% range. So risk control has been consistent with the mandate, and the strategy has delivered its Libor plus 5% gross over the full period since inception.

Capacity has also been a concern in relation to GARS in the past. However, total AUM in the strategy has fallen over the past 18 months following outflows. Analysts concern on capacity has therefore reduced.

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.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
ASI Global Absolute Ret Strat P1 Acc62.57 GBP0.39Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar