Buxton’s surprise resignation will take effect from 14 June and leaves the £3.5bn Schroder UK Alpha Plus fund in need of a manager. Schroders has yet to announce a replacement for Buxton (pictured), but has implied that the new appointment could come from within its own UK equity team.
The highly rated manager already runs a segregated mandate for Old Mutual which is identical to Schroder UK Alpha Plus.
It will be re-named Old Mutual UK Alpha Plus.
The move leaves investors with a dilemma: stick with the fund under a new manager or follow Buxton to Old Mutual?
Darius McDermott, managing director of Chelsea Financial Services, said: "There are lots of funds where a manager is part of a bigger team and an individual manager is less important, but in this case he is the lead manager and the one we backed 10 years ago."
"If you are an investor in the Schroders fund it is very likely you are going to want to follow the manager."
McDermott has suspended the fund’s membership of the Chelsea Core Selection list while Schroders searches for a replacement.
He says that there is no need for investors to panic, but believes Schroders needs to move fast or risk significant redemptions.
"He’s not leaving until June, which gives Schroders some time, but it’s not good news for them; they are obviously disappointed."
Mark Dampier, head of research at Hargreaves Lansdown, also warned investors to think long and hard before making any rash decisions.
"Investors don’t need to rush to sell this fund, since Richard is staying on until June. When we know who is taking over the fund we will be able to inform investors," he said.
Buxton has run the Schroder UK Alpha Plus fund since it was launched in June 2002 and has a strong track record of delivering outperformance.
Over 10 years it has made 271.5 per cent while the FTSE All Share has risen just 181.62 per cent, according to data from FE Analytics.
Over the past three years performance has slipped somewhat, although the fund’s returns of 38.78 per cent are still better than those of the sector and benchmark.
Performance of fund vs sector and benchmark over 3yrs
Source: FE Analytics
Dampier says that its track record is a strong testament to the ability of Richard Buxton.
"Richard Buxton launched the Schroder UK Alpha Plus as the antitheist to the tracker fund and has proved good active managers can add significant value," he said.
"The Schroder UK Alpha Plus fund has been on the Hargreaves Lansdown Wealth 150 since launch."
Buxton is extremely bullish at the moment and has been quoted as saying "we are in the foothills of a new equity bull market". He told FE Trustnet last year that a decade-long bear market had come to an end.
Bestinvest’s Jason Hollands says that Schroders has sufficient resources to find a suitable replacement for the manager.
"It is self-evidently disappointing news for Schroders to lose a key manager and the timing of the news – the peak season for new retail business – is clearly unhelpful," he said.
"However, it is important to remember that this is Schroders, a substantial and well-resourced investment institution, not a small boutique."
"Schroders has the depth and scale to get through this headache and Richard will be with Schroders for some months yet, providing a handover window."
Errol Francis, who works closely with Buxton, will also be joining Old Mutual, leaving the £628m Schroder UK Equity fund.
The fund has also beaten its benchmark over the past three years, making 37.15 per cent while the FTSE All Share is up just 32.28 per cent.
Old Mutual said in a statement: "By adding Richard and Errol’s large cap investment capabilities alongside our leading UK small and mid cap, UK all companies and UK Equity income teams, we will have a market-leading suite of long-only and long-short UK investment strategies."
Hollands says the appointments are a coup for the fund house.
"Old Mutual group has long had various disparate asset management interests but these have been increasingly coming together, most notably with the integration of Old Mutual Asset Managers (UK) and Skandia Investment Group."
"It has strengthened its management and distribution teams and the hire of Richard Buxton is a firm marker of its ambitions to build its investment franchise beyond its already well-regarded capabilities in areas such as UK mid and small caps."
Dampier agrees: "Old Mutual are trying to build their presence in the UK and the signing of this star manager is a significant statement of intent."
Buxton also heads up Schroder UK Growth IT – another standout performer among its peer group. The manager will also relinquish responsibility for this portfolio in June.
Peter Harrison, global head of equities at Schroders, is confident the UK team will be able to cope without Buxton, and points out that UK equity is only a small part of its business anyway.
"We thank Richard for his service to Schroders over the last 11 years. He leaves behind him a very strong UK equity team with 16 other fund managers and we will be announcing his replacement in due course," Harrison said.
"In the last few years, Schroders has diversified enormously. UK equity assets are now less than 5 per cent of our total global assets and two-thirds of our firm-wide revenues come from overseas markets, where we continue to see significant growth opportunities."