Falling stars: five top managers who lost their ratings

A reputation for consistent outperformance is hard won in active fund management and even more so when it is over a long period of time.

That is why when five highly consistent and long-term outperformers fail to beat their benchmark, it is worth a second look.

We highlight five top managers who have consistently held a Citywire rating over several years, but started the year without a rating. What has caused the recent dip in performance?

Ben Whitmore

Whitmore, who manages Jupiter Asset Management’s UK Special Situations fund, is known for his patience, with most of his holdings still in place since the fund launched in 2009.

His value-focused approach has proven to be a winner in the past, with Whitmore last failing to get a rating in July 2012.

However, a bull market that continued into 2017 with a strong rally in UK equity markets made the FTSE All Share a tough benchmark to beat, with many worthy performances failing to beat the buoyant market.

Whitmore returned 9.2% for the calendar year, failing to beat the 13.1% returned by the FTSE All Share.

Commenting on the last year of performance, Whitmore said: ‘Value-focused investors have faced a difficult environment over the last few years. In particular, the most expensive shares (in relation to their earnings) had the strongest performance, while the cheapest performed much worse, and we have reached unprecedented levels of underperformance of value versus growth. However, we continue to believe value stocks have a good chance of producing reasonable returns versus growth stocks.’

Major detractors form performance were Centrica, which issued a profit warning in 2017 and Aggreko, after analysts lowered their earnings forecast for 2018 following its weak third quarter trading update.

Whitmore is not the only manager whose fund failed to rise with the tide. 

Martin Cholwill 

Cholwill, who has managed the Royal London UK Equity Income fund since 2005, last failed to get a Citywire rating in May 2010.

While his investment style differs from Whitmore’s, he nevertheless suffered from a similar setback – a hard to beat FTSE All Share.

Commenting on his 2017 performance, Cholwill blamed the rally in energy stocks as a reason for underperformance.

‘The majority of the underperformance against the index is explained by the fund’s underweight position in both oil and mining stocks, which performed strongly over the quarter,’ he said.

The fund also suffered from its exposure to Saga, Cineworld and Daily Mail. Saga announced an unexpected profits warning in December which the stock market took badly, with the shares falling significantly more than the underlying reduction in earnings expectations.

Meanwhile, Cineworld announced the acquisition of one of the leading cinema chains in the US, which will require a large share issue to fund the purchase, leading to technical weakness in the shares as shareholders began to adjust their positions ahead of the expected rights issue.

UK equity income fund managers appear to be feeling the squeeze as other consistent outperformers have also lost their ratings this month.

Francis Brooke

Brooke, who manages Troy Asset Management’s Trojan Income fund, is famed for his performance during the credit crunch, when he returned investors 127%. However, he failed to beat his benchmark in 2017.

The Trojan Income fund returned 6.3%, compared to the 13.1% returned by the FTSE All Share.

‘Equity markets rallied hard into the year end and the FTSE All Share total return for the year of +13.1% proved a tough comparator for many funds, particularly those with a defensive bias,’ Brooke said in a December commentary.

Like Cholwill, his fund felt the impact of profit warnings at Centrica. In contrast, the biggest single contributor to the fund was WH Smith, which was up 12% over the calendar year.

Another UK equity income star to lose their rating this year is Colwell (left), who has been rated almost every month since he joined Columbia Threadneedle in 2010.

The £3.6 billion Threadneedle UK Equity Income fund managed by Colwell has in recent years topped the IA’s sector table. However, like the majority of the sector, the fund did not beat its benchmark. It returned 6.2% in 2017.

Richard Colwell 

Colwell was made head of Columbia Threadneedle’s £12 billion UK equity team in July 2016. On his appointment he described himself as a ‘player manager’.

However, since he took on the expanded role his Threadneedle UK Equity Alpha and Equity Income funds have struggled to keep up with the peer group.

Before losing his rating in January of this year, Colwell last failed to achieve a Citywire rating in May 2010. His seven and half years of market-beating results covered both the European financial crisis and EU referendum.

However, strong equity markets in 2017 proved tricky for the manager. 

Colwell sat 94 out of 102 in Citywire's UK Equity Income table last year, returning an aggregated 5.2% across his funds versus an 11.5% average in the peer group. 



Mark Westwood

Another Threadneedle stalwart to lose his rating is Westwood, who was consistently rated for the last four and a half years.

Westwood co-manages the Threadneedle UK Absolute Alpha fund, which saw its size balloon to nearly £1 billion in 2016 as it attracted investors with its peer group beating 17.2% returns.

Since then the fund’s performance has been anaemic and its three-year average now sits at 5.2%, less than half the sector average of 10.8%.

The lacklustre performance has meant that the fund has fallen off many buys lists, its size dropping to £689.7 million.