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Henderson wins McLean's SVM Global - but do manager changes work?

Henderson wins McLean's SVM Global - but do manager changes work?

Henderson duo Ian Barrass and Paul Craig are to take on SVM Global, Colin McLean's global growth investment trust.

As head of Henderson's private equity fund of funds, Barrass is on paper more than capable of running of the £141 million portfolio, while Craig, director of the asset manager's multi-asset business, will bring his experience as the sole manager of the successful Cirilium range.

It is understood more than 30 fund managers were in the running for the SVM trust, after a beauty parade was launched in December following the surprise resignation of co-manager Donald Robertson, and after a review by independent directors and PricewaterhouseCoopers raised a number of control, process and accounting issues.

Announcing the change in manager, SVM Global's board said its decision had followed a 'painstaking process'  of analysing the management, administration and marketing capabilities of the different companies that put themselves forward.

'The board concluded Henderson's offering in these areas was persuasive, in particular offering outstanding performance in the areas of investment covered by the company's strategy,' it said.

At the time of the beauty parade's launch, SVM Global's net asset value per share had declined by 12.2% against a rise in the benchmark of 17.7%, looking at performance over the 12 months ended in September.

As pointed out by SVM's board, Barrass has almost three decades' experience running private equity, no doubt earmarking himself and Craig as strong candidates given the private equity-type plays already in the portfolio, which sit alongside other names like BlackRock World Mining, Jupiter European and Oryx International Growth.

Is change a good thing?

From its shortlist of 33 possible managers, SVM Global's board narrowed this figure down to around 12, then three candidates made it into the final cut.

The eventual change in SVM Global's team is one of string for the trust sector in recent months, which includes Henderson Asia going to Schroders and BlackRock UK & Growth being handed to Nick McLeod-Clarke, and this flurry of moves raises the question of whether manager changes actually work.

Chris Brown, of JP Morgan Cazenove, said switching an investment trust's manager is one of the main advantages of trusts, and can be useful for turning performance around. 

The downside, however, is that a change is not always enough to guarantee an uplift in shares - where investors eventually gain their return when they decide to exit a vehicle.

Brown explained: 'The potential for a new manager to produce a recovery in performance means it is still one of the key benefits of the investment trust structure. 

'However based on our limited sample, we can see the appointment of a manager who is able to produce a recovery in performance does not necessarily guarantee a re-rating in the shares.'

Writing in his review of the investment trust sector over 2012, Brown crunched the numbers on six investment trusts where the managers had switched and pointed to BlackRock's Income & Growth as an example where a fund had undergone a manager change but marginally underperformed its benchmark.

Moreover, a change in manager often results in a rise in fees.  A stand-example would be Neil Woodford coming on board at Edinburgh Investment Trust leading to a rise from 26bps of total assets to 60bps of market capitalisation, with a performance fee on top.

But speaking about their appointment to SVM, Barrass said he and Craig are confident in the trust's future, and perhaps reassuringly, the board of another Henderson trust, Bankers, only last month unveiled a reduction in fees to investors.

Barrass said: 'Paul and I are delighted to have this opportunity to manage SVM Global and will work hard to deliver improved performance for both the trust’s board and its shareholders.

'We are confident the trust has an exciting future and we shall be looking to grow the trust over time.'

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