Critics also point to a number of other high profile fund management departures. In recent months Schroders has lost Nicola Ralston (its global head of investment strategy) and Jim Horsburgh (the head of its institutional business).
In addition, many also refer back to the departure of Jim Cox, the former manag
er of the flagship UK Enterprise fund, who resigned about two years ago. The fund, previously a top performer, currently only has a two star rating from Morningstar in the UK Equity Large Cap sector.
Schroders naturally mounts a robust defence of its position. For example, it points out that Ms Ralston resigned for family reasons while Mr Cox left as a result of ill health. In any event, Schroders argues, with over 150 fund managers it is to be expected that several will leave each year.
The company also points to several promotions within the firm as well as hirings from other fund management groups as indications of its strength. Massimo Tosato, the group managing director for Schroders’ retail business, has become a board member while David Gasparro was made head of retail investment in October 2000. The announcement of a high profile replacement for David Salisbury is expected soon.
Schroders has also recently poached Richard Buxton from Barings to work on specialist UK equities and back in early 2000 it hired Mark Pignatelli from the same firm to be head of European equities. Earlier this year it appointed a new US equity team lead by Ian Brady who was previously at Perpetual.
Expert reservations
Nevertheless independent experts seem to have mixed feelings about Schroders. While all those who Morningstar spoke to liked some aspects of the company they had reservations about others.
A key cause for concern, which is acknowledged by the firm, is the dip in the investment performance of its funds in the late 1990s and particularly 1999. Although performance has improved since then it can take time to rebuild a reputation after such problems.
Mr Gasparro is keen to point out that 60% of Schroders’ funds are currently performing above the average [median] of their peers on a rolling three year basis. Even those that are in areas that are performing relatively poorly at present, such as Asia and emerging markets, have a good long term track record.
For John Husselbee, the director of multi manager investment at Henderson Global Investors, Schroders has fallen victim to the cyclical character of the retail funds market. It was a top performer in the mid to late 1990s but, as was inevitable sooner or later, is no longer at the top.
On the positive side, Mr Husselbee acknowledges that Schroders still has a range of good quality fund managers. In addition he welcomes the launch last October of the firm’s range of style funds – in which each pursue particular investment styles – as an innovation for the UK market.
Process driven
But in his view Schroders is too preoccupied with its investment processes for a retail fund manager. “It’s more process driven than performance driven,” he says. “Perhaps there is too much tilt towards process at this stage of the cycle”.
For Mark Dampier, the head of research at Hargreaves Lansdown, Schroders is essentially suffering, along with many others, from increasingly intense competition in a difficult market. “There’s a heck of a lot more groups out there looking to manage your money,” he says. He points to the success of New Star and other new entrants as well as the rise of boutique fund management operations.
But Julian Samways, the head of corporate communications at Schroders, rejects this criticism. “Competition has always been very intense in our marketplace,” he says. While the competitor firms change there is always a fierce battle for retail funds.
Ironically one area on which there seems to be universal agreement about Schroders’ strong performance has proved problematic for many other fund managers. Denis Clough, the manager of the four star rated Schroder Tokyo fund, is widely seen as having performed well in exceptionally difficult market conditions. No doubt the rest of Schroders’ retail funds business would be delighted to emulate such an achievement.
Readers’ note: Morningstar provides statistical information to Schroders’ UK retail funds website.
