UK – Merrill Lynch Investment Managers says it is still winning “significant levels" of new mandates across Europe, despite a series of recent losses from UK local authority pension funds and its loss of the Merrill Lynch UK Investment Trust mandate.
In a letter to shareholders yesterday, Merrill Lynch UK Investment Trust chairman Richard Oldfield announced that MLIM would no longer be acting as manager on the 120 million pound (186.3 million euro) Merrill Lynch UK Investment Trust, and would be replaced by INVESCO Asset Management.
Oldfield said the board was “grateful” to MLIM, but that Invesco’s “style of investment management more closely matched criteria” and that the switch would “increase the chances of long term out-performance of the FTSE All-Share Index.”
A broker report from Winterflood’s trading, sales and research subsidiary, Close WINS, described the loss as “undoubtedly a blow” to MLIM, despite being a relatively minor account in financial terms. It further stated that “the fund’s poor performance was a key factor behind the board’s decision”.
According to the report, MLIM’s record in charge of Merrill Lynch UK was poor, with the net asset value lagging the FTSE All Share index by almost 20%. Close WINS blames this on the trust’s gearing and also poor stock selection.
Since September, MLIM has lost a series of high-profile mandates including Diageo, BAA, the University of Bristol, and local authorities Harrow and Essex. But a spokesman for the company insists it is still winning mandates - just not publicising them.
“The entire pension fund industry in the UK continues to experience restructuring away from traditional balanced mandates and towards tailored benchmarks. Whilst MLIM is experiencing this alongside the industry, we are also being successful in winning significant levels of new mandates across Europe. By their nature these new wins tend not to be made public,” said the spokesman.
With regards to the loss of Merrill Lynch UK, he added that “the board wanted a new style and a new manager for the fund and we respect that decision”.
Close WINS’s broker report says that the latest loss “will focus attention on MLIM’s other investment trusts”, but it is not believed that there are any direct implications.
INVESCO will take over the management of the Merrill Lynch UK Investment Trust on January 1 2003. It is likely that it will revert to its traditional name, Keystone Investment Trust plc.