On 7th November 2018, Aberdeen Standard Investments announced some important changes to the Multi-Asset Investing Team, affecting Standard Life Investments Global Absolute Return Strategies (GARS).  The fund features on our Established list.  

In summary:

• Guy Stern, currently Head of the Multi-Asset Investing Team (MAIT), is to retire in 2019.  Mr Stern joined Standard Life Investments more than ten years ago and was instrumental in establishing and building GARS and the associated suite of products.
• He will be replaced by Aymeric Forest, who is joining in February 2019.  He will have the title of Global Head of Multi-Asset Investing.  Most recently, he has been at Schroders, where he was Head of Multi-Asset Investments, Europe and Head of Global Income, Multi-Asset.
• Furthermore, there are some additions to the team responsible for the management of GARS.  Katy Forbes, Scott Smith and David Sol have become named portfolio managers and existing portfolio manager, Neil Richardson, will now focus exclusively on GARS.  They work alongside Dr Brian Fleming (Multi-Asset Risk and Structuring Team), Roger Sadewsky and Adam Rudd (existing portfolio managers).  The GARS team works closely with Andrew Milligan, who leads the Global Strategy Team and provides macro and strategy research.

Aymeric Forest has 20 years of investment experience, the bulk of which have been dedicated to multi-asset investing, including the management of absolute return portfolios.  He also has experience of managing multi-asset teams.  Following his arrival in February 2019, he will work closely with Guy Stern, Brian Fleming and other senior members of the team to undertake an orderly handover of responsibilities.  Until then, Mr Stern will continue in his current role.

Aberdeen Standard Investments has indicated that there is no change to the investment process as a result of this announcement.  The firm has also referred to a commitment to improving results for investors of the fund.  There has been much press about performance in relation to GARS and other funds of a similar ilk in the IA Targeted Absolute Return sector.  GARS has met its volatility expectations (between one third and a half of the risk of global equities, or a volatility range of between 4% and 8% pa, in normal circumstances), but recently, it has not achieved its return target (benchmark +5% pa, gross of fees on a three-year rolling basis), with the past three years proving to be particularly tough.

When we reflect upon the past three years, it is not surprising to observe performance challenges for multi-asset absolute return funds.  Equity leadership has been patchy and narrow and, outside of US technology stocks, many areas have made little or no progress.  For sterling investors, returns from overseas equities have been flattered by sterling weakness.  In fixed income, managers have been concerned about the potential for rising yields and the validity of bonds as a risk offset.  Until this year, hedging and volatility strategies have played an important role in portfolios but have typically detracted from returns.  However, the month of October was a timely reminder of the value of holding funds such as this within a portfolio.  While they have proved that they can offer a different return when compared to funds that are fully exposed to market direction, they are most likely to prove their worth in sustained negative market conditions.

GARS remains on our Established list for the time being.  The fund continues to benefit from significant resources and specialist skills, with philosophy and process intact.  We will continue our discussions with Aberdeen Standard Investments, with a particular focus upon Aymeric Forest’s future plans in his leadership role.