Marshall Wace is to restrict flows into Citywire AAA-rated Anthony Clake’s long/short Ucits funds, Wealth Manager can reveal.
Wealth Manager understands that the Marshall Wace Developed Europe Trade Optimised Portfolio System (Tops) and Marshall Wace Tops Market Neutral funds now hold a combined £2 billion of assets, which has prompted the firm to decide to soft-close them this quarter. The non-Ucits Tops strategy will not be affected.
Marshall Wace declined to comment, but the latest publicly available figures indicate the pace at which the Tops funds have grown. The Developed Europe fund contained £533 million at the end of June 2013, far above the £160 million of assets it reported in June 2012.
The funds’ investment process draws stock ideas from salespeople, brokers and strategists into its Tops database, which rates them by skill and risk, and rewards them if their recommendations perform well through commission payments. It runs a net stock market exposure range of between -20% and +50%.
Mick Gilligan, head of research at Killik, describes the strategy’s track record as ‘impressive’. Citywire data show that Clake has returned 19.6% over the past three years, compared with an average of 6.9% from his peer group. While the Developed Europe fund’s sterling A shares have returned 59% between its launch in March 2009 and the end of 2013, less than the 109% generated by the MSCI Europe index through the same period, this was achieved with around a quarter of the index’s volatility. The fund’s maximum loss during the time was 5.7% compared with 25% from the index.
For Gilligan, Clake’s long/short approach is particularly attractive as the equity bull market matures and valuations become stretched, while it also appeals to him on a relative basis within the absolute return sector.
‘A number of long/short equity managers have struggled in recent years,’ Gilligan observed. He estimated that the average European long/short equity fund lost around 6% through 2011 and 2012. ‘We have become less enthusiastic about long/short equity funds generally, given the lack of clear strategy in many cases and the reliance on one or two key individuals. The Marshall Wace Tops strategy has a clear and differentiated strategy and is diversified across a wide range of individuals. This diversification should help to maintain the consistent return profile and the simplicity of the process should help to provide greater reassurance to investors during periods of underperformance.’