The Henderson SRI Team leave
The only remaining member of the SRI team at Henderson is Tim Dieppe and he is due to leave on the 31st March 2012. The IFA community is unsure how to progress. Mike Tyrell is quite right in his assessment as to why investors in the past have chosen Henderson:
"Investors that chose Henderson’s funds did so because they wanted an alternative; because they are more sophisticated; because they believe that the ‘Industries of the Future’ themes and ‘Best-in-Class’ approach will deliver investment outperformance; because they value the corporate governance and engagement activities; and because they support the innovative investment-thinking that has emerged from the team."
The problem the investor now has to consider is firstly:
- What level of service is EIRIS providing?
- What are the alternative options?
What level of Service is EIRIS providing Henderson?
The information to date out of Henderson on what EIRIS are doing for them has been non-existent. It is very difficult for IFAs, or investors, to make any sensible decision until this happens. I have asked this question of Mark Robertson at EIRIS but while he tells me that EIRIS do a lot more than simply screening these days, he is not at liberty to say what level of service they are providing to Henderson without their permission.
On the 20th January members of the Ethical Investment Association have organised, for a select group of IFAs, a conference call with Andrew Jones (Manager of Henderson Global Care Income from 1st January 2012), Graham Kitchen (Head of Equities) and Paul Dagger (Account Director). This is likely to be a discussion more around UK equities than international (given that Tim Dieppe is still managing the Henderson Industries of the Future and Global Care Growth fund) and thus should be easier for the Henderson team to address.
The UK does not rely so much on the thematic approach and so this conference call will be a good test for the new team. It will be interesting to hear how Henderson will manage the UK fund with external consultants and whether the team knows exactly what those external consultants are being paid to do and how it will work.
What are the alternative options?
Henderson are a top performer
From a UK perspective Henderson may be on a safe track. The irony being that George Latham, the former manager, has outperformed his competitors over the last year. It is the best performing UK ethical fund over one year and with a yield of 4.01% second only in yield to Jupiter Responsible Income.
Yield is a key factor in an investor's choice of the Henderson Global Care Income fund and there simply are not many ethical alternatives - Jupiter Responsible Investment and F&C Stewardship Income are currently the only two with high enough yields.
Are the alternatives viable at the moment?
In the UK the alternatives for an income seeking ethical investor are very restrictive and many investors will hold a number of funds anyway to diversify their risk. They are most likely in this scenario to hold onto the Global Care Income fund (£87.41m). But for those who are inclined to move it may be sensible to wait because the alternatives are changing, or could change soon. Jupiter recently changed the ethical focus and name of their UK fund from being 'environmental' to 'responsible', while we are still waiting to see what strategic direction F&C will take with the assimilation of the Thames River business.
The story is different for the global funds and maybe why Tim Dieppe has been retained until 31st March. The acid test of the strategic change in direction at Henderson will be here. It will be difficult to continue the current positive strategy and themes using external consultants and reduced personnel. While for the investor, there is much less uncertainty surrounding the alternatives available and a multitude of options. It is the retention of funds in the Industries of the Future fund (92.64m) and the Global Care Growth Fund (£124.86m) which is going to be Henderson's biggest challenge.
Monitoring Investor Response
In the top down strategic review I suspect Henderson will have factored in a fair degree of 'apathy' amongst the investor base and will expect to hold onto a substantial amount of the retail funds, even if they lose many of their institutional mandates. Retail funds are particularly sticky and given the lack of information being provided to investors many of the retail investors will not be aware that changes have happened at all.
Ethical Funds under Management
The SRI team at Henderson have stated that on the 30th June 2011 they managed approximately GBP 750.1 million in SRI assets, across a range of pooled (including the Global Care range of funds) and segregated funds for clients including pension funds, local authorities, charities and individuals.
The Worldwise Investor first quarterly report as at the 30th September 2011 put the amount in pooled funds at £490m. It will be interesting to monitor the impact of the management changes on these figures compared to their peer group. The evidence from our research for our second quarterly report due out in Feburary 2012 is that there has not been a material move away from Henderson by retail investors yet, but there is a long way to go.
So what next for Ethical Investors
There is no decision really that can be made at the moment because there are too many uncertainties in the market and a great lack of information available on which to base it.
In my opinion investors and IFAs should wait until:
- Aviva have announced the results of their strategic review and the impact this might have on SRI at Aviva (Feb 2012);
- F&C have announced what they are doing in the SRI field now that they have bought Thames River and a new Marketing Director (Tracy Fennell) has been appointed; and lastly,
- Henderson have explained properly their 'SRI proposition', allowed EIRIS to be open about what level of service they are providing and for Henderson to put some meat behind it with updated literature.
The corporate decisions facing Henderson are the same ones facing the other two big players in the ethical investment market, F&C and Aviva. It is very important for ethical investors in the UK that they draw different strategic conclusions in order to maintain genuine alternatives. It is not though a foregone conclusion.