Star UK fund managers suffer stormy spring - Lipper

Storm clouds are seen above the Canary Wharf financial district in London on August 3, 2010.

LONDON (Reuters) - A slew of Britain's elite fund managers may face tricky questions from clients as performance slips, heaping pressure on a "star" manager culture the industry has crafted to lure investor cash.

Some of the biggest names in UK fund management have booked underwhelming three-month, six-month and one-year returns to April 30, data from Thomson Reuters fund research house Lipper shows, denting reputations in markets they tend to dominate.

Sanjeev Shah of the $5 billion Fidelity Special Situations (Acc) Fund is one such manager trailing peers in the Lipper Global Equity UK universe over all three time periods, resulting in relative underperformance of 8.76 percentage points in the year through April.

The man Fidelity chose to succeed veteran Anthony Bolton in charge of the UK portion of the fund in 2008 said he was disappointed the fund had fallen below peers, but a preference for financials and real estate over the likes of commodities and industrials would bring rewards over time.

"Managing a special situations portfolio -- where you are consistently going against the herd and buying into weakness -- is going to lead to fairly lumpy performance," Shah said, adding that investors were always advised to take a three-to-five year view on their investment decisions.

"I have a very distinct style of managing money. I look for sectors and stocks that are unloved, disliked by the sell-side and under-owned by institutions ... and most managers today are overweight in areas which look expensive to historical context."

British fund management houses have been playing down the significance of their top talent to performance at fund and group level since Guillaume Rambourg and Roger Guy exited Gartmore, triggering a rapid outflow of cash that culminated in its sale to rival Henderson Group (HGGH.L) earlier this year.

HIGH PROFILE

Analysts say many houses are unwilling to entirely abandon the powerful marketing tool, fearing some individuals are more popular than the brands they represent.

But an unclear economic outlook and increased market volatility mean many celebrated managers are underperforming peers in the fields in which they made their names.

Philip Gibbs, manager of the $1 billion Jupiter Absolute Return (Acc) Fund, feted by his employers after beating all comers during the financial crisis, is trailing his Lipper Global peer performance by 5.3 percentage points in the year to April 30.

Neptune's Robin Geffen -- a high-profile commentator in the British press -- has seen his $1.15 billion Global Equity B (Acc) Fund underperform by 2.65 percentage points in relative terms over the half-year through April.

And M&G's Richard Woolnough, manager of the $6.7 billion M&G Corporate Bond A (Inc) Fund, posted performance 1.06 percentage points below Lipper peers over the same period.

Fidelity's Shah said net flows to his fund were broadly flat despite the downturn, supporting the idea that star managers can attract more cash than less charismatic rivals and hold onto money longer through rough times.

But institutional investors were becoming less patient with big names who fail to deliver, said Ryan Hughes, a senior manager at fund of funds investor Skandia Investment Group.

VALUATION INCREASE

"There are some very, very good fund managers who are uncomfortable in the limelight and those managers have not taken anywhere near the level of assets their quality deserves," Hughes said.

Commodities mogul Evy Hambro, lead manager of the $5 billion BlackRock Gold & General (Inc) Fund, has also struggled to keep pace with peers in the Lipper Global Equity Gold & Precious Metals sector over three, six and 12-months to April 30.

The long-term value fund, which invests in high quality gold and other precious metals producers, undershot peers within a range of 2.36 and 4.56 percentage points over the year.

It was hit indirectly by volatility in silver prices and a re-rating of companies with existing cash-flow producing assets.

"Over the relatively short time period mentioned, pure-play exploration companies saw valuation ratings increase on the back of bids for companies such as Andean," a statement to Reuters on behalf of BlackRock's Natural Resources team said.

"This was especially true in the fourth quarter of 2010 and the start of 2011, when many low-quality exploration companies saw their 'hope values' rise sharply and the market has ignored the higher-quality producing names."

Schroders UK mid-cap equities specialist -- and occasional DJ on British radio station Jazz FM -- Andy Brough is one star manager pedalling hard to turn relative underperformance around after months of stock market jitters following the Japanese quake, North African unrest and sovereign debt woes.

His $2.2 billion Schroder UK Mid 250 (Acc) Fund underperformed peers in the Lipper Global UK Equity Small & Mid-Cap space by 9.35 percentage points over the year to April 30, but delivered 0.16 percentage points of outperformance in the three months to end-April.

"Market volatility has been a salient feature of the past few years; a situation that is likely to persist as the fallout from the financial crisis continues to unfold," a spokeswoman for the fund at Schroders said.

"The better performance of micro and small-caps over the period has skewed the benchmark against the fund. We believe our emphasis on well-financed companies with strong business models, attractive assets and significant growth potential will deliver robust returns over the long term, irrespective of short-term volatility."

(Editing by David Holmes)