ii puts Merian North American Equity fund under formal review

The inclusion of the Merian North American Equity fund on interactive investor’s Super 60 rated funds list has been placed under formal review. This follows the announcement that Merian is to be acquired by Jupiter and a co-manager of the fund is set to leave the business. 

The formal review is in line with our Super 60 methodology, which is monitored continuously for ‘red flag’ events. Examples of such events include, but are not limited to, fund manager moves, soft closures or a major re-rating from external or internal sources.  

interactive investor’s Investment Selection Committee will decide to either retain or replace the fund within the Super 60 listing. Our goal is to reach a decision within three months of the date when the investment was placed under formal review. This gives us enough time to discuss our concern with the relevant fund manager and/or allow an opportunity for improvement. 

The review of the Merian North American Equity fund, which features on the Super 60 list as a core US Equity option, is not a reflection of recent performance, or a recommendation to sell the fund. 

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Dzmitry Lipski, Head of Funds Research, interactive investor, says: “In line with our stated methodology, the investment selection committee decided to put Merian North American Equity under formal review on 25th February 2020. This follows the announcement that Merian has been acquired by Jupiter and a co-manager of the fund will be leaving the business. 

“We will be seeking a better understanding of what changes, if any, are likely to take place as it goes under Jupiter’s corporate umbrella and how that could impact the fund’s team structure, philosophy and process. In addition, we need to be sure that there will be a smooth succession for the leaving co-fund manager that should not negatively impact the way this fund operates.”

Background

Merian North American Equity is managed by a highly experienced team, headed by Ian Heslop. The fund follows a systematic process which adapts to changing market conditions. It copes well in weaker markets and would be expected to perform best in trending markets while struggling more during periods of heightened volatility.

At our January 2020 annual review meeting, we reviewed the fund in line with our methodology and identified no issues that should stop us from recommending it to customers. The enhancements that were made at the end of last year and ‘normalised’ market environment should support the performance of the fund, after a challenging 2019. The fund continues to score high relative to peers as a well-diversified fund (over 300 positions) with consistent large cap core exposure to the US market. 

Recent Developments

Corporate change: On the 17th February, it was officially announced that Jupiter has made an offer to buy Merian Global Investors for £390 million. Following that news, it was also released that five fund managers – Richard Buxton, Ian Heslop, Amadeo Alentorn Farre, Daniel Nickols and Richard Watts agreed to join Jupiter. 

Co – manager change: On a separate communication from Merian, we were informed that Mike Servant – co-fund manager and co-head of systems has decided to retire from business. Mike has played an integral role in helping build the global equities desk at Merian and has been co-managing Merian North American Equity, along with a few other funds. Mike will remain with the business until the end of June 2020. The global equities funds will continue to be managed using a team-based approach, with Ian Heslop retaining overall responsibility for the desk. 

Sean Storey, who joined MGI in late 2017, was promoted to co-head of systems in September 2019 and has been working closely with Mike on the development of the desk's modelling programme. Sean has over 20 years' experience in commercial software and quantitative system development and will become head of systems following Mike's departure. They boosted the team's resource through the appointment of Tarun Inani in October 2019 as quantitative developer.

Previous Super 60 formal reviews

This is the second time that interactive investor has placed one of its rated funds under formal review, the first being LF Lindsell Train UK Equity on 29 November 2019 after being downgraded by two independent external agencies. Given its highly concentrated nature, we wanted to reassure ourselves that there had been no deterioration in liquidity.

The review was concluded on 20 January 2020 and the fund was retained on Super 60. The majority of the holdings are large, liquid companies with diversified revenue streams. In terms of capacity, there is plenty of room for further growth without compromising the mandate. The fund has always had a concentrated, high conviction approach but has a low turnover and long-term successful track record.

Since launching Super 60 in January 2019, there have to date been no changes to the line-up.