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What Tim Russell's departure means for Cazenove Capital

What Tim Russell's departure means for Cazenove Capital

Tim Russell's departure from Cazenove Capital has come as something of a shock and will no doubt be a blow to the firm's retail fund management business.

Russell is a highly respected figure in the industry and his reputation as a solid fund manager, built over 26 years, means he will be missed. But perhaps more worrying for Cazenove, after Neil Pegrum left to join Soros, it is a second big name to depart the company within a year.

However, Russell's decision to take a career break, believed to be for personal reasons, comes after a couple of difficult years in terms of performance.

Moreover, although he was the pan-European head of equities, Russell only ran £255 million for Cazenove, which is effectively less than 2% of the company's investment fund assets. This statistic alone will surprise many.

Ironically though, it is only now that Cazenove has said that although Russell's face was on the fact sheets of Cazenove's Cazenove UK Growth & Income as well as UK Equity Income funds, he was not actually in charge of those funds. 

While the two funds were launched for Russell when he joined the company from HSBC, in 2009 Cazenove sent a note to clients informing them that David Docherty will be take over full responsibility of day to day running of the funds. Russell's input was more from a strategic point of view as the head of European equities.

But it is on the Cazenove UK Absolute Return fund, which was launched for Russell in July 2008, where performance has lagged. As the above graph shows, the fund has returned only 0.8% since its inception, while the IMA Absolute Return Sector has delivered 11.8%. The FTSE ALL Share index, meanwhile, is up 26.6% during this period.

Cazenove insiders point out that Russell had an excellent 2008 -- i.e. when it mattered the most -- but the fact of the matter his figures over the past two years have lagged. Even though year to date the fund is up 3.7%, over 12 months he is down 4.7%.

 

Simply speaking, the market did not come around to Russell's way of thinking. In particular, his fund's performance has been hurt by a staunch stance to avoid mining stocks, as well as some of the energy names. As the graph above shows, miners have been some of the top performers in the index and Russell's decision to short the likes of Rio Tinto and BHP BIlliton at times during the last two years has not paid off.

Steve Cordell, Russell's replacement on the UK Absolute Target fund, is said to have wanted a return to retail fund management for some time. Investors in the fund who will no doubt be tempted to take the cash out may be somewhat consoled by the fact Cordell has run long-short UK and Europe strategies at HSBC, and is not another one of the long-only managers who fancies trying his hand at shorting.

Nevertheless, with absolute return funds, investors put their faith in the manager rather than the product and Cazenove are likely to be hit with withdrawals from the £197 million UK Absolute Target retail fund, along with Russell's other mandates - the Cayman-domicilised  £35 million Cazenove UK Equity Absolute Return and £22 million Leverage UK Equity Absolute Return hedge funds.

Furthermore, Chris Rice, who has effectively taken over as the head of European equities is probably the biggest star at Cazenove and will no doubt be seen as an effective replacement.

It is understood Russell -- who has worked with Cazenove CEO Andrew Ross since the mid 1990s at HSBC - is leaving on friendly terms. The big question, therefore, is whether Russell will make a return to the industry in the years to come and if Cazenove will take him back.

Although no one can answer with certainty, there is no doubt plenty of other fund management houses would welcome Russell with open arms.

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