Well-known UK manager Philip Rodrigs is understood to be disputing the conclusions of River & Mercantile Asset Management's two-month investigation into his professional conduct, which led to him leaving the firm yesterday.
The group said yesterday the internal disciplinary matter was unrelated to Rodrigs' portfolio management responsibilities and has not impacted the pricing or NAV of any RAMAM fund, while no client or investor had been affected.
This specific professional conduct breach is understood to date from December 2017 and is unrelated to the statement of objections issued by the FCA last November against River & Mercantile and three other firms, which the regulator believes may have broken competition law.
However, it is understood the conduct issue was identified as a result of improved systems and controls put in place by the group following the FCA's investigation, while it now has a heightened sensitivity to risk.
The firm then conducted a two-month investigation into the matter and concluded Rodrigs' conduct was "incompatible with the high standards which we expect from our staff".
According to the The Times, Rodrigs is disputing the company's conclusion and is taking legal advice.
Rodrigs, who is 36, had worked at the firm since March 2014, when he joined from Investec Asset Management, and left on 7 February.
James Barham, chief executive of RAMAM, said: "It is disappointing to have to take this course of action but we have acted swiftly to ensure that the portfolios continue to be managed in line with our PVT investment philosophy and process. This will ensure that we continue to deliver market leading investment returns for our clients."
Shares in the River & Mercantile Group fell 6.5% following the announcement to trade at 318p by 11am but they recovered to end the day down 3.2% at 329p. Meanwhile, shares in the group's UK Micro Cap trust dropped 14.6% on the day to close at 181p.
Succession on the funds
Rodrigs was manager of the £900m River & Mercantile UK Equity Smaller Companies fund, £375m UK Dynamic Equity fund and £110m UK Micro Cap investment trust.
Dan Hanbury will take over UK Equity Smaller Companies, William Lough will take over UK Dynamic Equity and the trust will be managed by George Ensor.
Hanbury, who also runs the UK Equity Income fund, previously ran the UK Equity Smaller Companies fund from 2006 to 2010 and was the alternate manager on the fund when Rodrigs took over.
The R&M UK Equity Smaller Companies fund has returned 53% over the past three years to 6 February, compared to the IA UK Smaller Companies sector average of 49%, according to FE.
Meanwhile, the £375m R&M UK Dynamic Equity fund has returned 32.1% over the past three years to 6 February, compared to the IA UK All Companies sector on 20.4%.
Hargreaves Lansdown has said it will be removing the R&M UK Dynamic Equity fund from its Wealth 150+ list following the news. The group's UK Equity Smaller Companies fund was not on the Wealth 150.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "The reason we had the fund on the list was because of Rodrigs and now he has gone we will be removing it and writing to all clients and letting them know what has happened.
"We are not going to assume another manager can run the fund just as well."
He pointed out that unlike Dan Hanbury, who has been a fund manager for nearly 20 years, William Lough had only worked as an assistant fund manager for the past four years so does not have the same long track record.
Jason Hollands, managing director business development and communications at Tilney, commented: "Today's announcement that fund manager Philip Rodrigs has left River & Mercantile following "an investigation into a professional conduct issue… unrelated to his portfolio management responsibilities" is undoubtedly a big news shock within the UK asset management industry and the sort of announcement any business, let alone a listed one, would dread having to make.
"The substance of the issue that led to this departure is unknown but River & Mercantile have stated "no client or investor has been negatively affected" so it seems the main pain will be felt by the business itself.
"Rodrigs was widely seen as one of the rising stars of UK equity fund management who earned his spurs at Investec where he initially focused on UK smaller companies but had expanded his repertoire out to manage multi-cap UK equity funds.
"At River & Mercantile he had assumed responsibility for the River & Mercantile UK Dynamic fund while continuing to manager the R&M UK Equity Smaller Companies fund. Neither of these funds were on Tilney's "buy list" but had started to deliver some impressive performance since taking over the UK Dynamic fund.
"R&M overall have a well-regarded UK equity team and have, of course, been quick to announce new management arrangements. The smaller company fund has been handed back to Dan Hanbury, who ran it with mixed results until 2014, while the UK Dynamic Equity fund goes to William Lough. I think most advisers who have supported these funds will want to meet the managers rather than rush hastily into to a decision, which is sensible.
"For those disinclined to wait and see or who might now be looking elsewhere for further investments, competitive UK multi-cap funds to consider as alternatives are Liontrust Special Situations and the JO Hambro UK Dynamic fund and in the small-cap space Franklin UK Smaller Companies, Fidelity UK Smaller Companies or Liontrust UK Smaller Companies."
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