Investors should continue to back the Baillie Gifford Japanese equity team despite the departure of long-tenured manager Sarah Whitley, according to market analysts and financial advisers.
On Monday it was announced that the manager of the £1.9bn Baillie Gifford Japanese and £609m Baillie Gifford Japan Trust would step down as a partner at the firm in April 2018 after a 37-year career.
Stephen Rodger and Ken Barker – two partners of the fixed income team – also announced their retirement.
Following Whitley’s retirement next year Matthew Brett will take over as lead portfolio manager on her funds with Praveen Kumar joining him as deputy portfolio manager.
Meanwhile, Baillie Gifford Japan growth strategy head Donald Farquharson will assume the responsibilities of head of the Japanese equity team.
Whitley has run the Baillie Gifford Japan Trust since 1991, during which time the investment company has returned 674.57 per cent compared with the 138.41 per cent return of the Topix benchmark.
Performance of fund vs benchmark since manager start
Source: FE Analytics
Graham Spooner, investment research analyst at The Share Centre, said: “Of course it is a loss as she has been at Baillie Gifford around 37 years and has had a solid track record in Japan.”
However, he said all tenures come to an end and while Whitley is the most experienced member of the team, it remains a large and experienced group.
“Matthew Brett joined Baillie Gifford in 2003 and Praveen Kumar in 2008 and are well versed in the process and capable of heading a large and experienced team,” Spooner added.
Tony Yousefian, investment trust specialist at FundCalibre, said while the team was very much influenced by Whitley, he was confident it would continue to be well-led when she retires next year.
He noted: “Matthew is often the manager our research team meets and we rate Praveen, so Sarah is leaving the fund and trust in good hands.”
Several analysts commented that the team approach at Baillie Gifford should allow the funds to continue to outperform despite the management changes.
Ben Conway, senior fund manager at Hawksmoor Fund Managers, noted: “Whitley is indeed a loss for Baillie Gifford – she is one of the longest-standing members of the UK-based Japanese fund management community.
“However, the way Baillie Gifford build teams and run the firm, key man risk is never that large.
“Their process and philosophy is so strong and imbued through every investment team member that the way funds/trusts perform should never be affected that much by the departure of one person – even one as senior and experienced as Whitley.
“Brett is a very capable replacement and has been steeped in Baillie Gifford investment lore from the beginning of his career.”
Brett joined the Baillie Gifford Japanese fund to work alongside Whitley in 2008, during which time the fund has returned 183.44 per cent, almost double the return of the Topix benchmark and IA Japan sector.
Performance of fund vs sector and benchmark since manager start
Source: FE Analytics
Conway added: “In short, I don’t believe investors need worry – Whitley’s departure was inevitable at some point given how long she’s been at the firm so this will have come as a surprise to no one internally and should not be a massive surprise to anyone outside the firm either.”
Charles Stanley Direct’s Rob Morgan said every member of the Japanese equity team also had investment company research responsibilities, “whether they are investment managers or analysts”.
He said: “Thus every team member contributes ideas to the portfolio, so, while I’m sure she will be missed, any disruption to process and style will likely be minimal.
“Investors should see a continuation of the approach, which favours companies with above-average growth prospects that can also be purchased at reasonable relative valuations.”
Praveen Kumar, manager of the five FE Crown-rated Baillie Gifford Shin Nippon investment trust since December 2015, will also take on greater responsibilities.
Under his tenure the trust has returned 71.35 per cent while the IT Japanese Smaller Companies sector has returned 51.87 per cent while the MSCI Japan Small Cap benchmark was up by 44.93 per cent.
Performance of fund vs sector and benchmark since manager start
Source: FE Analytics
Andy Merricks, head of investments at Skerritts Wealth Management, said: “We’ve been long-term holders of the Shin Nippon, as well as the open-ended alternative, and a similar situation arose when John MacDougal stepped down in 2015 with Kumar succeeding him.
“Shin Nippon has continued to go from strength to strength, not only because Japanese Smaller Companies has risen to the fore, but within its own sector as well.
“I don’t know if there’ll be any style change, but in general: ‘if it ain’t broke, don’t fix it’.”
Overall, the analysts agreed that investors currently invested in Whitley’s funds should continue to hold them despite her departure.
“It certainly wouldn’t be an automatic sell trigger for us. More often than not, it pays to give changes in personnel time to settle in,” Merricks said.
However, The Share Centre’s Spooner said that investors should remain focused on the funds’ performance.
“Investors should always focus more when there has been changes of personnel so keep an eye on monthly fact sheets over the next year,” he concluded.