Important changes to the St. James s Place range of investment funds April 2014
Important changes to the St. James s Place range of investment funds April 2014 As a client of St. James s Place, you understand that the responsibility for selecting, monitoring and, where necessary, changing the investment managers looking after your wealth is central to the Investment Committee s role. This report outlines a number of important changes we are making to our funds and fund managers that will take effect from 28 April. The Investment Committee believes these manager changes are in the best interests of our clients and will help you to achieve your long-term objectives to build and maintain capital. A significant number of our clients will be affected by these changes. There is no need for you to take any action as a result of these developments. But we would encourage you to contact your St. James s Place Partner if you have any further questions or concerns. This report covers the following topics: 1. The appointment of Woodford Investment Management as the investment manager of the UK Equity and Income Distribution funds and the UK High Income Unit Trust 2. The appointment of Threadneedle Investments as the investment manager of the Strategic Managed Unit Trust and Invesco Perpetual Managed fund, which will be renamed Strategic Managed 3. The appointment of Manulife Asset Management as the investment manager of the Global Equity Income fund 4. Closure of the Global Emerging Markets fund to new investments 5. Launch of the new Emerging Markets Equity fund managed by Wasatch Advisors 6. The appointment of James Hamel of Artisan Partners as an additional investment manager for the Global Managed fund and Global Unit Trust 7. Management of future investments into the UK & General Progressive fund 8. Changes to our Growth and Income Portfolios. 3
UK Equity and Income Distribution funds and UK High Income Unit Trust Woodford Investment Management Neil Woodford has built a reputation over the last 25 years as one of the most respected investment managers in the UK, and has delivered impressive returns for our clients since he started to manage funds for St. James s Place in 2001. The announcement in October last year of Neil s decision to leave Invesco Perpetual and establish his own company was perhaps the most high-profile and significant event in the recent history of investment management. The period since that announcement has provided a true demonstration of the strength of the St. James s Place investment approach. The Investment Committee and Stamford Associates have had unrivalled access to all the parties involved in these developments. Over the past six months, meetings have been held with the CEO and CIO of Invesco Perpetual s UK business and also with the CEO of the global Invesco board in New York. This has enabled us to gain a detailed understanding of the background and potential solutions. Neil Woodford Throughout this process, the core objective has been to identify and implement what we believe is the best solution for our clients; a solution which allows a seamless change to a new fund management company. We are pleased to confirm that, following a comprehensive review of the options available, the Investment Committee has decided that Neil Woodford will retain management responsibility for the UK Equity and Income Distribution funds and UK High Income Unit Trust in his new company Woodford Investment Management. The events that led to the decision of the Investment Committee to retain Neil s services provide a very tangible demonstration of our investment approach in action; how it can provide our clients with peace of mind and, ultimately, a unique solution to the challenges presented by Neil s departure. The significance of this decision and the benefits of our investment approach were further underlined following the announcement that responsibility for the Invesco Perpetual funds previously managed by Neil was being handed over to another manager earlier than had previously been announced, at the beginning of March. For investors in those funds, the decision had been taken out of their hands. 4
In the period until his departure at the end of April, the St. James s Place mandate is the only one for which Neil will retain responsibility, ensuring unique continuity of management for St. James s Place clients. The Investment Committee believes that Neil s long-term, disciplined and low turnover approach can continue to offer opportunities to generate an attractive income yield and capital appreciation over the medium to long term. His meticulous approach to investment allows businesses he supports to create value for investors and the wider economy. His ability to identify fundamentals and to balance macroeconomic views, business specifics and his insights on management teams has resulted in exceptional long-term performance. Existing investors will suffer no additional charges or tax implications as a result of these changes and will also see a reduction in the ongoing annual management charges for these funds. 5
Invesco Perpetual Managed fund and Strategic Managed Unit Trust Threadneedle Investments Alongside his responsibilities for management of our UK equity funds, Neil has been the lead investment manager for the Invesco Perpetual Managed fund and Strategic Managed Unit Trust since 2001. As a result of Neil s decision to establish his own investment management business, the Investment Committee has taken this opportunity to review the management of this mandate. A balanced managed strategy requires a blend of high-quality manager solutions within a single management business. Following a comprehensive search process, conducted by our investment consultants Stamford Associates, who undertook a qualitative review of approximately 350 investment firms in the US, UK and Europe, the Committee has recommended the Richard Colwell Stephen Thornber Jim Cielinski appointment of an investment team new to St. James s Place. Threadneedle Investments will assume responsibility for management from 28 April. Threadneedle manages assets of 89.3 billion on behalf of individuals, pension funds and corporations. The team will adopt a similar strategy to the current Strategic Managed portfolio, utilising UK and international equities alongside fixed-interest securities and cash. Richard Colwell will lead the UK equity strategy, joined by Stephen Thornber managing global equities and Jim Cielinski for the fixed income element. As an obvious consequence of the decision to change the investment manager, and to impose greater consistency of naming, the Invesco Perpetual Managed fund will be renamed Strategic Managed from 28 April. Existing investors will suffer no additional charges or tax implications as a result of these changes and there will be no increase in the ongoing annual management charges for these funds. The Committee believes that the appointment of Threadneedle represents an attractive investment management solution for this strategy and is looking forward to working with the Threadneedle team in the aim of achieving attractive investment returns for investors. 6
Global Equity Income fund Manulife Asset Management When first launched in February 2012, the Global Equity Income fund was managed by Paul Boyne and Doug McGraw of Invesco Perpetual. Later that year, they left Invesco Perpetual and subsequently joined Manulife Asset Management, based in its offices in Boston, USA. Through its ongoing research process, Stamford Associates has continued to monitor the progress of Paul and Doug and the integration of their investment strategy at Manulife. Paul Boyne Doug McGraw Whilst the management team at Invesco Perpetual has continued to deliver attractive returns, the Investment Committee believes that clients in the Global Equity Income fund will be best served by the appointment of a specialist global income team. We are delighted to confirm that Paul and Doug will resume responsibility for this fund with effect from 28 April. Whilst a name relatively unknown to many investors in the UK, Manulife Asset Management is responsible for the management of over $250 billion for investors both in the US and around the globe. Paul and Doug s investment process aims to identify high-quality businesses with the ability to generate high levels of cash flow. Their approach is not limited to those companies that are currently paying a high dividend; the team also invests in established companies with a lower yield but with the potential for dividend growth over the medium to long term. There will be no increase in the ongoing annual management charge for this fund as a result of this change. The appointment of Paul Boyne and Doug McGraw is testimony to the ongoing research and monitoring capabilities available to the Committee through our relationship with Stamford Associates. Furthermore, the Committee believes that this represents a very strong investment proposition that offers our investors a complementary addition to our range of equity income solutions. 7
Global Emerging Markets fund First State Investments We will be limiting further investments into the Global Emerging Markets fund managed by Jonathan Asante of First State Investments. The combined assets under management for the Global Emerging Markets fund is today around 800 million. Jonathan has advised the Investment Committee that he believes the fund has now reached capacity and that to continue to accept new investments would lead to his successful investment process being compromised. Jonathan Asante The Investment Committee believes this step is in the best interests of existing investors in the Global Emerging Markets fund and consequently, from 28 April 2014, we will no longer accept any new lump sum or regular investments into the fund other than through existing regular monthly or annual contributions. It will also no longer be possible for clients to switch from other funds into the Global Emerging Markets fund. Switches out of this fund will, of course, still be permitted. Jonathan will continue to actively manage his fund and, therefore, if you are an existing investor, your investments are unaffected by this change. Jonathan will also remain as a co-manager for the Worldwide Managed fund and Worldwide Opportunities Unit Trust. 8
Emerging Markets Equity fund Wasatch Advisors As a consequence of the decision to limit further investments into the Global Emerging Markets fund, the Committee has been working with Stamford Associates to develop an alternative investment solution for investors seeking exposure to this sector. Ajay Krishnan Roger Edgley On 28 April, the new Emerging Markets Equity Fund will be launched. With management by Wasatch Advisors of Salt Lake City, Utah, the ability to access the skills and expertise of Ajay Krishnan, Roger Edgley and their team represents what is in the UK an opportunity exclusive to clients of St. James s Place. The fund looks beyond the traditional BRIC economies, commonly associated with emerging market investing, to identify new opportunities in an investment universe extending to over 30 countries. This go anywhere strategy provides Wasatch with the flexibility to find businesses that are typically not well covered by other investors and has led to positions in countries including Peru, Thailand, Egypt and Indonesia. The appointment of Wasatch Advisors is further demonstration of the global reach of the St. James s Place approach to investment management. As part of their comprehensive research process, Stamford Associates reviewed over 400 investment teams from around the world before concluding, through further analysis and face-toface meetings, that Wasatch represented the superior investment solution. The depth and rigour of this process gives the Committee great confidence in appointing Wasatch to the roster of managers. 9
Global Managed fund and Global Unit Trust Artisan Partners Since their appointment in October 2010, Dan O Keefe and David Samra of Artisan Partners have been responsible for successfully managing the Global Managed fund and Global Unit Trust. As part of its continuing monitoring process, the Committee has been discussing the future capacity for this fund with the investment team at Artisan. Consequently, the Committee and Stamford Associates have been considering the addition of a complementary global strategy that would enable Dan and David to continue to manage the fund whilst catering for the anticipated future growth in assets under management. James Hamel The Investment Committee has identified that Artisan s global opportunities strategy provides a strong complement to the global value approach and has decided to appoint James Hamel as an additional manager for this strategy. James joined Artisan in 1997 and is based in Milwaukee as one of the founder members of their Growth Team. Whilst also looking to invest at a discount, his strategy has more of a growth bias and seeks to invest in companies with franchise characteristics that are benefiting from an accelerating profit cycle and which have defensible competitive positions. The portfolio will typically have between 30 and 50 positions, with an emphasis on mid- and large-cap global businesses. Dan and David will continue to manage their share of the fund, but from 28 April all inflows will be directed to James s growth strategy. The Investment Committee believes this appointment provides a strong solution for meeting the future growth requirements of the fund, whilst taking advantage of the other high-quality investment resources at Artisan. There will be no increase in the ongoing annual management charges for this fund as a result of this change. 10
UK & General Progressive fund J O Hambro John Wood of J O Hambro has co-managed the UK & General Progressive fund since September 2009. In October last year the Investment Committee appointed Luke Chappell of BlackRock and the UK equity team at Majedie to manage the fund in combination with John. The Investment Committee and Stamford Associates have for some time been discussing with John his future plans and cash flow capability, acknowledging his reluctance to invest in companies that he believes are fully valued in a market rally driven by liquidity rather than company fundamentals. This principle has seen his cash weighting increase. The Committee has concluded that it is now appropriate to stop John Wood further inflows into John s portfolio to ensure that the integrity and strength of his investment approach is not compromised. John will continue to manage his share of the fund s assets, but all future regular and lump sum contributions will be split between the other managers, BlackRock and Majedie. There will be no increase in the ongoing annual management charges for this fund as a result of this change. 11
St. James s Place Growth and Income Portfolios The Investment Committee has undertaken a full review of the Growth and Income Portfolios in light of the fund changes outlined in this report and has made a small number of changes to the Portfolios. Balanced Portfolio In light of the decision to limit further investments into the Global Emerging Markets fund, it will be replaced in the Balanced Portfolio by the new Emerging Markets Equity fund for new investments from 28 April. FUND NAME Alternative Assets Global Equity Global Managed (Global) International Corporate Bond Investment Grade Corporate Bond Multi Asset Property UK & General Progressive Worldwide Managed (Worldwide Opportunities) Far East Emerging Markets Equity ONSHORE 5% 5% OFFSHORE 11% 11% 11% 11% 11% 11% 11% 11% 6% 6% Managed Funds Portfolio The only change to the Managed Funds Portfolio is to reflect the renaming of the Invesco Perpetual Managed fund to Strategic Managed. FUND NAME Strategic Managed Schroder Managed (Managed Growth) AXA Framlington Managed (Balanced Managed) Global Equity Global Managed (Global) International Equity Worldwide Managed (Worldwide Opportunities) ONSHORE OFFSHORE 12
Adventurous Portfolio In line with the change to the Balanced Portfolio, the new Emerging Markets Equity fund will replace the Global Emerging Markets fund for new investments into the Adventurous Portfolio. FUND NAME Emerging Markets Equity Far East Greater European (Greater European Progressive) High Octane North American UK & General Progressive Corporate Bond ONSHORE OFFSHORE The Investment Committee believes that, for the remaining Portfolios, the current blend of funds and asset classes remains appropriate. You do not need to take any immediate action as a result of these changes, but this may be a timely opportunity to review your investment strategy or objectives. If you would like to discuss the options and opportunities available to you, please contact your St. James s Place Partner. The value of an investment with St. James s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested. Past performance is not indicative of future performance. 13
Summary Today we are responsible for over 44 billion of our clients wealth and we remain very aware of the continued trust that you place with us. We also recognise the importance of taking the steps appropriate to maintain a robust investment proposition and of keeping our clients informed. We hope this report has highlighted our ongoing commitment to find and retain the best of breed investment managers to look after our clients wealth. If you have any questions or concerns about the changes set out in this report, please contact your St. James s Place Partner. 14
The St. James s Place Partnership and the titles Partner and Partner Practice are marketing terms used to describe St. James s Place representatives. Members of the St. James s Place Partnership represent St. James s Place Wealth Management plc, which is authorised and regulated by the Financial Conduct Authority. St. James s Place Wealth Management plc, St. James s Place UK plc, St. James s Place Unit Trust Group Ltd and St. James s Place International plc are members of the St. James s Place Wealth Management Group. St. James s Place UK plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. St. James s Place Unit Trust Group Ltd is authorised and regulated by the Financial Conduct Authority. St. James s Place International plc is authorised and regulated by the Central Bank of Ireland. St. James s Place Wealth Management plc Registered Office: St. James s Place House, 1 Tetbury Road, Cirencester, Gloucestershire, GL7 1FP, United Kingdom. Registered in England Number 4113955. SJP4237-VR1 (04/14)