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“A change in management makes sense”: Tom Dobell to depart the M&G Recovery fund

17 September 2020

The well-known but underperforming value fund will have more of a focus on mid-caps under new manager Michael Stiasny.

By Gary Jackson,

Editor, Trustnet

Tom Dobell will step down from managing the £1.4bn M&G Recovery fund at the end of the year, a move which one commentator thinks “makes sense” after an extended bout of underperformance.

Dobell has run the fund since 2000, initially enjoying strong performance as the value style of investing that it follows was rewarded by markets.

However – as the chart below makes clear – recent years have been more challenging. For much of the past decade, value investing has lagged the growth style by a wide margin and this has seen M&G Recovery fall towards the bottom of the IA UK All Companies sector.

Performance of M&G Recovery vs sector and index by calendar year

 

Source: FE Analytics

FE fundinfo data shows the fund is currently in the bottom quintile of the sector over one, three, five, 10 and 15 years. It also behind the FTSE All Share by a significant margin over these time frames.

Since Dobell took over the fund, it has made a total return of 131.70 per cent. This puts it in the second quartile of the IA UK All Companies sector (where the average fund is 117.90 per cent) and ahead of the FTSE All Share’s 120.31 per cent.

Darius McDermott, managing director of Chelsea Financial Services, said: “Tom has run this fund for the past 20 years – the first 10 of which were very successful for investors as he made the most of the commodities boom.

“However, after the global financial crisis, the fund failed to adapt to the changing environment and, coupled with a style headwind, performance has suffered since. Many investors chose to invest elsewhere.”

Its long track record (the fund was launched in 1969) and strong results in Dobell’s early years meant the fund became a popular option for investors. Assets under management peaked at £8.1bn in early 2012 but outflows and poor returns have brought it down to £1.4bn today.

Dobell will stand down from M&G Recovery, and leave M&G, at the end of the year. Michael Stiasny will take over the management of the fund at that time.

Performance of M&G Recovery vs sector and index under Dobell

 

Source: FE Analytics

M&G, which said the change is “part of an ongoing review” of its range, added that there will be no change to the fund’s investment objective and policy. But it will have a “refreshed investment approach” under Stiasny, who will put more of an emphasis on recovery opportunities in the mid-cap space.

Jack Daniels, chief investment officer at M&G, said: “I’d like to thank Tom for his dedication to the M&G Recovery fund and its investors.

“While the environment for his style of investing over the past decade has been very challenging, his effort and commitment on behalf of customers have never faltered. He steps down after 28 years at M&G with our best wishes for this next chapter of his life.

“Recovery investing has been a cornerstone offering within our equities business for over 50 years. With a highly experienced investor in Michael Stiasny and a renewed focus on the M&G Recovery fund’s core strengths, we believe we are well-positioned to meet the fund’s objectives and deliver investors the returns they expect.”

Stiasny has been a co-manager on M&G Recovery since January 2011. He also co-manages the M&G Charifund, M&G UK Income Distribution and M&G Dividend, which he will continue to work on after becoming M&G Recovery’s lead manager.

According to FE fundinfo’s calculations on individual managers’ performance, Stiasny has outperformed Dobell by around 25 percentage points over the past 10 years.

Performance of Stiasny and Dobell over 10yrs

 

Source: FE Analytics

Adrian Lowcock, head of personal investing at Willis Owen, said: “Dobell's mammoth fund has been underperforming for years as recovery investing has been out of favour for a long time. His resignation will be tough as Tom has diligently executed the fund's process and philosophy. 

“However, a change in management makes sense to take the fund forward in a changing world, where recovery investing may need a fresh perspective as we move through the pandemic.”

But McDermott said those investors who are still with M&G Recovery need to consider whether they stick with the new manager and his greater focus on UK mid-caps.

“It continues to be a challenging time for recovery investors and mid-caps, in particular, could feel the brunt of any Brexit bad news in the short term,” he said.

“But over the long term, I am still of the belief that the price you pay for shares in a company has an impact on future returns. Some investors may like to give the new manager the benefit of the doubt and see how he progresses. Others may prefer to put their faith in a more experienced multi-cap recovery manager.”

Other experienced value managers that McDermott favours include Nick Kirrage and Kevin Murphy (Schroder Recovery), Alex Savvides (JOHCM UK Dynamic), Ben Whitmore (Jupiter UK Special Situations) and Hugh Sergeant (ES R&M UK Recovery).

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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.