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Widows dumped UK shares when the computers took over

Fund managers have complained that a shake-up at the investment arm of Lloyds Banking Group caused share prices to fall.

 
Widows dumped UK shares when the computers took over

Fund managers at Henderson have complained that rival firm Scottish Widows Investment Partnership (Swip) caused share prices to fall after it scaled back active fund management in the UK earlier this year.

Swip, the investment arm of Lloyds Banking Group, slashed the size of its fund management team in April as it moved the £54 billion in its UK funds to a computer-driven 'quantitative' strategy.

Sometimes dubbed 'black box' the quant approach involves in putting huge amounts of stock data for computers to process. Stocks are then chosen from a list that the computer has screened, thus requiring fewer analysts and fund managers. Those fund managers that remain at Swip are mostly employed on global or specialist equity funds.

The change require a total reorganisation of Swip's portfolios which, according to the managers of the Henderson UK Absolute Return fund, had a big impact on the stock market as the firm dumped large stakes in firms.

Swip had held big positions in Berkeley Group (BKGH.L) (15.2%), Tullett Prebon (TLPR.L) (12.7%), DS Smith (SMDS.L) (7.8%), Resolution (RSL.L) (10.35%), UBM (UBM.L) (6.8%) and Reed Elsevier (REL.L) (6.9%). ‘Following the announcement by Swip we observed very active selling/shorting of these Swip names,’ managers Ben Wallace and Luke Newman said.

Housebuilder Berkeley is the only stock to have gained in value over the past three months. The rest have fallen heavily in contrast with the FTSE 100 which rose and fell to be flat over the period.

The managers added: 'Our overall exposure to Swip names is now materially lower and we are monitoring the situation very closely as many of these stocks appear very attractively valued.

'In an attempt to enhance our process, we will now take into account our overlap with other investment institutions as part of our portfolio construction process.'

Swip said: ‘It was made clear … we are moving a significant proportion of our high alpha equities to be managed on a “quant” (low risk alpha) basis.’

2 comments so far. Why not have your say?

mikeran

Jul 06, 2012 at 17:36

I would suggest that certain similarities may have been experienced by many Private Investors, particularly those that participate in their own as opposed to Fund management type investment.

This as a result of the more widespread use of computers and sophisticated software by all branches of the Trading Groups.

Long term a few may benefit substantially by the changes that have taken place,But Investors as opposed to traders will already have noticed a downturn in reasonable returns.

Some parts of this downturn, could perhaps be attributed to the lack of effective regulation, and some to interna/self policing of development within the Industry.. Libor or PPi miselling is only the first symptom, in my view of a wider problem within . And a need for those regulating to understand , rather than some years later to find, as now , an oh my G** ( did that really happen) scenario.

We are today paying the price for PPI and Libor events which took place around 2008.

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Franco

Jul 06, 2012 at 19:01

It was about time that even SWIP saw some sense. In the geat majority of cases, active managers under perform monkeys with a pin. And Hendersons whose performance is even poorer, should stop finding excuses.

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  • Berkeley Group Holdings PLC (BKGH.L)
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  • Tullett Prebon PLC (TLPR.L)
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  • DS Smith PLC (SMDS.L)
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  • Resolution Ltd (RSL.L)
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  • Reed Elsevier PLC (REL.L)
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  • UBM PLC (UBM.L)
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  • Ben Wallace
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