Friday, 24 November 2017

    Is there life on Gars?

    Consultants are wondering how Standard Life’s flagship fund will fare as its architect leaves

    When Invesco Perpetual poached three members of Standard Life Investments’ Gars team last September, the insurer briefed concerned consultants carefully.

    Of course, the three team members had been highly valued and would be missed but, it was diplomatically inferred, they were manning Gars’ engine room, not piloting the plane. SLI insisted at the time that the company’s multi-asset head Euan Munro and all of his direct reports remained in situ.

    So when it was announced in mid-July that Munro (pictured), widely viewed as the architect of Gars, is leaving to take over as Aviva Investor’s new chief executive, SLI was left in a sticky position. Gars (or to give it its full billing: Global Absolute Return Strategy) is SLI’s £18bn flagship fund and a popular default investment fund for pension schemes.

    Research by Spence Johnson puts Gars’ market share at 38%

    No wonder: the fund’s performance has been hugely impressive, boasting 48.2% cumulative performance over the past five years. Gars was one of the first entrants into the diversified growth fund (DGF) market. Since then, many asset managers have followed suit and launched products. It dwarfs rival DGFs – research by Spence Johnson puts Gars’ market share at 38%.

    Hargreaves Lansdown has taken the bolder step of removing Gars from its Wealth 150 list

    The fund’s success means that every twitch of a gilded curtain in SLI’s Edinburgh headquarters is watched closely by the pensions industry. Thus far, Munro’s departure has sparked a flurry of consultants’ notes to pension fund clients, while Hargreaves Lansdown has taken the bolder step of removing Gars from its Wealth 150 list of favourite funds as it monitors the fund in the post-Munro era.

    A SLI spokesman emphasises that Munro wasn’t running Gars or the team on a daily basis: “Guy Stern was brought in by Euan in April 2008 to run the strategy.” Pan Governance chief executive Steve Delo points out that Munro is taking on a managerial role at Aviva, which could corroborate the idea that his role in Gars was, at least towards the end of his tenure, one of ‘hands-off oversight’.

    On the other hand, Gars will open some very big doors for those who are credited with its success. Under Aviva, which has a lower profile DGF, Munro may develop its offering to rival Gars. Could Munro take some of SLI’s team with him? Delo said: “I’d be very surprised if he didn’t; it’s a ‘route 1’ thing to do.”

    Euan’s got a much bigger job to do at Aviva than just look at the multi-asset side

    But SLI’s spokesman responded: “Euan’s on gardening leave. It’s in his contract that he can’t poach staff. Euan’s got a much bigger job to do at Aviva than just look at the multi-asset side. Aviva’s had an interim chief executive for 18 months. There’s a lot to do there.”

    Anyone with an interest in Gars must now try to establish whether the fund’s success is attributable to a single person, a skilled team, or a well-oiled process. It wouldn’t be easy to answer these questions with respect to any fund: it is especially difficult when looking at a fund that is as sophisticated as Gars.

    If consultants understand any fund available to UK pension fund trustees, it should be this one

    “This is where, for the first time in a very long time, consultants’ manager research can earn its corn,” said Delo.

    “If consultants understand any fund available to UK pension fund trustees, it should be this one. They should have it mapped; they should understand who’s doing what.”

    A great deal of pension fund money will depend on whether consultants can establish what Munro’s departure means for Gars’ future performance.

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