Hendersons seeks more unified approach
Group looks to build up its name in UK equities and secure far more third-party distribution
The largely lacklustre performance track records of Henderson Global Investors' onshore fund range and investment trusts is the central focus behind a revamp at the group.
The group's chairman Roger Yates is pushing for change and is looking to head of equities Andrew Formica to revamp the investment processes and teams, where needed, such as on the UK equities desk for example.
At the same time, the group's recently appointed UK director of wholesale, Phil Jefferson, is looking at how to build up Hendersons' profile among intermediaries.
A key part of his strategy is to focus on distribution via third parties such as banks and life offices, a move that has been pioneered in recent years by the likes of Newton, Merrill Lynch and Liontrust.
Despite this emphasis on corporate relationships however, Jefferson is keen to stress the group is not abandoning advisers.
Work is currently taking place on many different levels within the group, from restructuring the investment desks, to opening up its offshore range to UK investors, to strengthening its marketing and sales team.
At the same time, the performance on several of its unit trusts and investment trusts has fallen dramatically, leading to the withdrawal of institutional investors and the loss of several close-ended fund mandates.
A succession of firms have ditched the Broadgate stable for running closed-end mandates, including a large portion of the Witan investment trust, which spawned the house itself in 1934.
Despite rumours the 95 year-old trust was to abandon the house altogether, Hendersons emerged from the process hanging onto a majority of the portfolio. Most of the money is in index-plus funds with only small-cap manager Neil Hermon, who also runs the Henderson Smaller Companies Trust, keeping his actively managed mandate.
The loss of much of the £1.4bn trust came only days after a succession of other departures, including Chris Turner's TR Property, which followed its manager to Thames River, and Electric & General which took on veteran boutique manager operation Taube Hodson Stonex.
Despite the departures, the group still has control of 10 investment trust mandates with a total of £2.2bn of assets.
On the open-ended side of the business, the loss of UK fund manager Richard Prew this month was seen as a further serious blow to the firm. Jefferson sees it as a turning point however and the start of a process that will see Hendersons return to its position as a provider of core funds for the UK retail market.
Following Prew's departure, the UK Capital growth fund is already slated for a revamp under new manager Mileen Rash. While the fund was run with a top-down macro style under Prew, Rash will manage the assets with a bottom-up emphasis, moving across all caps but with a bias towards mid caps.
Feeding stock ideas into the portfolio at the lower end of market capitalisation will be the group's small-cap team headed by Hermon.
Hermon will also be heading up the newly formed Pan-European smaller companies team. This consists of fund managers Stephen Alder and Simon Savill, plus Colin Hughes and Theresa Wat. The move comes as the group merges its UK and European desks, under the leadership of Stephen Peak.
The group has also recently switched the management of its US funds over to active quants.
On a wider scale, Jefferson said the main aim is to bring all the various areas of expertise in the company together.
At the moment, he describes the firm as consisting of 10 separate units: onshore funds, offshore portfolios under the Horizon brand, hedge funds, multi-manager, structured products, institutional funds, property, investment trusts, direct investors and SRI.
"We allowed these different parts to evolve and ended up with segregated businesses within one house," Jefferson said.
By centralising some of the functions of these 10 units, the group hopes to have a more unified offering that will benefit each area. Hendersons has quietly built up a stable of hedge funds and its offshore Horizon fund range also shows better performance than the onshore funds, although the managers have performance-related fees on these portfolios.
The challenge Jefferson noted is to spend more time on the onshore portfolios, with various options being considering, including merging portions of the on and offshore ranges.
A step in this direction is the re-application of distributor status to the Horizon funds to make them available for UK retail investors again.
But sorting out the UK-based funds is a 12-month plan. The aim is to have a core range of top performers, competing in one of the most competitive areas of the market, UK equity growth and equity income. This would seem familiar territory for intermediaries, having heard a similar story some three years ago when Prew and Patrick Harrington were brought in from Norwich Union and M&G respectively.
The plan was to revamp the group's UK retail funds, achieve strong track records as a precursor to attracting intermediaries back into its funds.
Prew joined Hendersons in February 2001, a move that, at the time, the group hailed as being a revolution for its equity desk. At the time he took over UK Capital Growth, the fund was at the bottom of the UK All Companies sector and within 12 months was performing in line with the sector average.
Today, the three-year track record, ending 27 September, on Capital Growth places the portfolio at 143 out of 246 funds with returns of 14.9% compared with the peer group mean of 19.2%, bid to bid.
Harrington, who at M&G ran its Extra Income fund and Charifund, joined the group shortly after Prew to head up the equity income side. At the time of his appointment the Henderson UK Equity Income fund was ranked 70 out of 89 funds for the 12 months to 1 June 2001, based on offer to bid returns of -5.39%.
Over the three years since taking on the fund, Harrington has moved it into second quartile with gains of 28.9%, outstripping the peer group average of 27.5%, bid to bid.
His shorter-term numbers also place it in second quartile, with gains of 2% versus a mean of 1.6%, ranking it 37 out of 80 funds in the Equity Income sector.
If Hendersons' last attempt to build up a UK equity desk and track record for the retail market has not proved to be a huge success, why should it be different this time around?
Jefferson said: "Three or four years ago it was based on the idea we would buy in some names and they would get it right. This is a much more mature approach, we need to get the process and teams rights, get the information flow right between analysts and managers.
Hendersons has traditionally been an institutional business with some retail funds rather than an out and out retail venture. This was certainly the case when it emerged as the asset management arm of its one time Australian parent, AMP.
Again, the critics will want to know whether Hendersons is really serious about retail, and if so, why? "It is about diversity of revenue stream," said Jefferson. "We have had performance difficulties, not just on institutional but on retail as well. So when institutional hasn't worked we have found ourselves in difficult circumstances."
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