John Ions, chief executive of Liontrust, has robustly defended his managers’ performance after several of the firm’s funds were bottom quartile last year.
Liontrust’s Special Situations, UK Growth and UK Smaller Companies funds, run by AA-rated Anthony Cross and Julian Fosh, were all bottom quartile over the year to the end of 2013, but first quartile since launch or manager tenure. At the end of January, Special Situations was third quartile and UK Smaller Companies was second quartile.
‘Cross and Fosh had a harder year last year, with quantitative easing and a move away from quality to risk-on type assets,’ Ions (pictured) said.
‘They have a very rigid process that drives them away from banks and miners. We debate what’s in the portfolio on a regular basis.’
He added he would only stop backing a fund when ‘the fund manager loses confidence in his process’, something he has not experienced yet.
Ions, who has been at the helm of the company since 2010, said managers James Inglis-Jones and Samantha Gleave also suffered in the ‘dash to trash’, with their four European funds all bottom quartile in one year to the end of January.
‘The process very much lends itself towards quality. Quality on a global screening basis last year underperformed, it was much more risk-on and value,’ he said, adding that the managers had become more positive on the outlook for Europe.
Ions added he was not phased by the fund groups pricing war sparked by the Retail Distribution Review.
‘We have set our stall out saying this is the process, this is how we run money,' he said.
'We are not benchmark constrained so we are not playing that index plus game, we are going to stand or fall on whether we produce the returns and therefore whether we charge 65 or 75 basis points at the end of the day is irrelevant. It only becomes important if we don’t deliver what we say we are going to deliver.’
He argued that while the larger groups may charge less for their funds, the pressure on them will be greater if they offer index-type performance, when tracker funds have much lower fees.
Meanwhile, the firm’s UK Equity Income and Macro UK Growth funds, run by Stephen Bailey andJan Luthman, have seen a pick-up in inflows following the announcement of Neil Woodfood’s impending departure from Invesco Perpetual.
‘We have seen a pick-up in fund flows. We have got two managers with a very well thought of process and good numbers behind them,’ he said.
Ions thinks Woodford’s decision to leave highlights the importance of creating the right environment for fund managers.
‘For whatever reason he has gone to a small business and there is every chance he will make it a significantly bigger one, but what it does say is unless you create the right environment for your managers, no matter what you pay them, they are not going to stay,’ he said.
Since taking over the business, Ions has worked hard to diversify the fund range. At the end of last year, assets under management had grown to £3.6 billion, up 6% on the third quarter.