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Why investors shouldn’t rush to depart Man GLG Japan CoreAlpha along with its managers

16 October 2020

With the news that Man GLG managers Stephen Harker and Neil Edwards will be retiring next year, Trustnet assess fund pickers’ reactions to the announcement.

By Eve Maddock-Jones,

Reporter, Trustnet

News that longstanding Man GLG Japan CoreAlpha managers Stephen Harker and Neil Edwards are retiring should not concern the investors in their funds, according to market commentators.

This week, Man GLG announced that both Harker and Edwards would be retiring after almost 20 years at the firm.

Both Harker and Edwards have been co-managers of the £1.1bn Man GLG Japan CoreAlpha fund since 2006, while they also co-manage the offshore version of the strategy.

Management of the Man GLG Japan CoreAlpha fund will be handed over to Jeff Atherton, who has been a co-manager on the fund since 2011.

When longstanding managers leave or retire from their funds, it can unsettle investors. This is due to concerns that the process will change or shifts in the equilibrium of the fund’s management could impact on performance, posing the question of whether they should stick with the new management or not.

But Darius McDermott, managing director of Chelsea Financial Services, said that this retirement news should not concern investors in the Man GLG fund.

He said: “Both managers are in the mid-60s so the announcement is perhaps no surprise although may well have been brought forward due to recent working from home practices and a general taking stock of our futures.

“Jeff Atherton, who is also a co-manager, will take on the lead role, supported by a very strong team that has been boosted in the past few years.”

McDermott added: “Whilst the team is losing a huge amount of experience, nothing will change day to day and the team-based process and philosophy will remain.

“Jeff is well known to the market and there will be a very orderly and unrushed handover. I think this is good succession planning and should not be of concern to investors.”

Under the managers’ tenure the Man GLG Japan CoreAlpha fund has outperformed both its sector and index with a total return of 103.22 per cent. This compares with the TSE TOPIX index’s 92.37 per cent rise and the IA Japan sector’s 83.79 per cent return.

Performance of the fund versus sector in index under Harker and Edwards tenure

 

Source: FE Analytics

That said, the fund is currently in the bottom-up quartile of the IA Japan sector over one, three and five years. Over this last time frame, it has underperformed its average peer by more than 30 percentage points.

Willis Owen head of personal investing Adrian Lowcock described Harker as a “contrarian investor” and noted that the fund is run with a value approach, which has struggled over recent years and has been outpaced by the growth style.

Lowcock said Harker (pictured) believes company valuations revert to a long-term average in price, meaning that he will look for businesses which are unloved by the market compared with its competitors. Harker uses price to book ratio and P/E ratios to assess a company’s value.

This “real value bias” will remain in the fund’s process once he retires, Lowcock said.

“Under Stephen Harker, Man GLG's Japan CoreAlpha team have built one of the leading, and longest running, franchises in the fund management industry, but importantly they have instilled a true team ethos in what they do, and in Jeff Atherton and the other members of the team they have real long-term experience,” he said.

"Stephen is the face of the strategy, and is synonymous with Japanese equity investing, with his focus on long-term reversion to the mean, and a real value bias, instilled in everything the team do. That philosophy won't leave with Stephen and Neil's exits, and because of this, investors don't need to rush to make a rash decision here.”

Lowcock added: "Despite periods of underperformance, the strategy boasts an impressive long-term track record and there's no reason to think that can't continue after Stephen's exit next year."

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.