Once billed as Neil Woodford’s protégé, Mark Barnett has produced a sustained period of underperformance in recent years.
Invesco Perpetual’s Mark Barnett has been sacked as manager of the £1.1 billion Edinburgh investment trust due to poor performance.
Interim results for the trust were due to be released in November. Released today (11 December), they showed that in the six months to November the share price of the trust had fallen by 5.9%, compared to the FTSE All-Share’s gain of 4.6%.
Longer term the performance has also been disappointing, with the trust returning just 13.1% over the past five years, compared to 34.7% for the AIC’s UK Equity Income sector and the FTSE All Share’s total return of 38.9%.
Chairman of the board Glen Suarez said: “I am disappointed by another weak result for the company in today’s interim results, extending the period of underperformance to beyond three years.”
The chairman said the board had “worked hard” to understand why the trust had underperformed and concluded it best to replace the current management with Majedie Asset Management.
The news comes following recent pressure on Barnett following a period of underperformance and several ratings downgrades for his other funds.
Moira O’Neill, head of personal finance, at interactive investor, notes the firing of Barnett does not come as a surprise, particularly as “the board of Edinburgh Investment Trust has never been shy of hiring and firing.”
She adds: “In September 2008 the trust moved from Fidelity to Invesco, and the board has had form prior to this too.
“It’s a classic example that changing a fund management group is not necessarily the panacea to improve performance, but it is nevertheless a useful tool of last resort that boards of investment trusts have that open ended funds don’t.”
The appointment of Majedie is unlikely to see much of a change in the investment style of the trust. According to Ryan Hughes, head of active portfolios at AJ Bell: “The appointment of Majedie is interesting as the team have a clear value bias at present, which has caused their UK equity funds to underperform.
“This means that the team have a similar positioning to Mark Barnett at the moment, albeit without the small company exposure, so the change in manager won’t represent a massive shift in the style of the portfolio positioning.”
However, while the investment style is likely to stay similar, the new management can be expected to make significant changes to the companies in the portfolio.
James de Uphaugh, who manages Majedie UK Equity, has been named as the trust’s new portfolio manager. The board describes him as “a highly experienced active manager with a flexible investment approach.”
Majedie UK Equity fund has underperformed the Edinburgh trust over the past six months, delivering a return of 1.4%. While this matched the FTSE All Share index, over the same period Edinburgh saw a return of 4.4%.
Over a longer period of five years, Majedie UK Equity returned 25.6% compared to the trust’s 13.1%. Both, however, have lagged the FTSE All Share index, which has returned 38.9%.
Alongside the change in management, the board also announced a fee cut, with the current annual rate of 0.55% of market capitalisation being lowered to 0.48% on the first £500 million of market capitalisation and 0.465% on amounts above £500 million.
No fee will charged for the first three months of Majedie’s management. Majedie’s James de Uphaugh is expected to take over management in the first quarter of 2020.
The share price of the trust has (as of writing) barely moved following the news.
Priyesh Parmar, analyst at Numis Securities, notes "the change to Majedue does not seem an obvious choice". But added: "We are not wholly surprised to see another change in manager for Edinburgh investment trust, although we believe the timing of the change is intriguing given that the bias towards value and UK domestic stocks has been a key driver of underperformance, and the result of tomorrow’s UK election may have a significant impact on sentiment towards these stocks."
Edinburgh inv trust
I too am surprised at appointment of Majedie - and am not convinced that this is benefiicial as although styles may be similar, performance is mediocre.
Out of frying pan into the fire?