Scottish Widows Investment to Swap Stock Pickers for Quant Funds
The 54 billion-pound ($86 billion) equities business will shed 70 percent of its 38 “active” money managers who select investments, Scottish Widows Investment Partnership said in a statement today. The Edinburgh-based company will focus on global equities for clients willing to take more risk and investments for those wanting low risk.
Chief Executive Officer Dean Buckley has been trying to boost stock-fund performance for more than two years. Between the start of 2010 and March 2011, he hired more than 20 fund managers. The Scottish Widows U.K. Growth Fund (TSBUKGA), its 1.4 billion- pound flagship equity fund, has ranked in the bottom 11 percent of competing funds over one, two, three and five years, according to data compiled by Morningstar Inc. (MORN)
“It makes sense to rationalize and get rid of what you are not good at,” Ben Yearsley, a financial adviser at Bristol- based Hargreaves Lansdown Plc, said by telephone after the announcement. “There will be less divergence in returns and you might as well be less bad and less volatile.”
Scottish Widows Investment currently manages 27 billion pounds, or 50 percent, of its stocks using quantitative investment strategies for customers seeking to reduce risk. The other half is managed actively by fund managers.
Once the transition is complete, Scottish Widows expects to oversee about 77 percent of its equity assets in quantitative strategies, 13 percent in funds tracking indexes and the remaining 10 percent will be actively managed, spokeswoman Kahrene Lawrie said by telephone.
“The asset management industry is seeing an increasingly clear divide between those equity investors seeking high-alpha solutions and those preferring a lower-risk strategy through a quantitative-based approach,” the firm said in its statement.
So-called quant funds seek to outperform competitors that track indexes by using computers and math to find the best investments. The quant business, which is headed by Sean Phayre, will hire another four people, taking his team to 17 and translating into a 23 net reduction in jobs overall.
Will Low, who was hired last year from BlackRock Inc., the world’s largest money manager, will remain as head of the global equities desk, the statement said. Andrew November stays in his post as director of equities.
There will be continuing roles for James Clunie, who runs an absolute-return fund, Gregor Macdonald and Andrew Paisley, who manage investments in small companies, and Vicky Watson, who oversees real estate securities, Lawrie said.
The position of head of U.K. equities, held by Peter Cockburn, will be scrapped as part of the changes, said Lawrie who declined to comment further. Cockburn wasn’t reachable for comment at his office in Edinburgh.
The London-based Times newspaper reported earlier today that Cockburn may be among the money managers to leave. It didn’t say from where it got the information.
The fund unit, which oversees 143 billion pounds, is trailing U.K. competitors in attracting money from external clients. In 2010 and 2011 it had net outflows, while the money- management units at Standard Life Plc, Prudential Plc and Aviva Plc all had net inflows in both years.
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