Star UK equity manager Nigel Thomas retires from asset management this week after a four-decade career, but fund pickers have applauded the succession process and retained confidence in his flagship fund. 
Thomas is one of the best-known managers in the UK equity space and it was announced in April 2018 that he will stand down in March this year.
Former deputy Chris St John took over Thomas’ AXA Framlington UK Select Opportunities fund at the start of 2019, although the two managers had worked alongside for some time. Thomas remained a co-manager on AXA Framlington UK Mid Cap, AXA Framlington UK Growth and AXA World Funds Framlington UK until his retirement.
Performance of Nigel Thomas vs peer group composite over 15yrs
Source: FE Analytics
At the time Thomas’ retirement was announced, AXA IM Framlington Equities global head Mark Beveridge said: “We would like to take this opportunity to sincerely thank Nigel for his time at the company, his dedication to his unit holders and to the UK equities desk. We wish him all the very best for the future as he enjoys his retirement.”
The chart about shows Thomas’ performance over the past 15 years – which includes the global financial crisis and the decade-long bull run that followed – compared with his peer group composite.
As can be seen, his growth investing style has paid off over the long term and nowhere is this more apparent than the AXA Framlington UK Select Opportunities fund, which he ran from September 2002.
Over this period, the fund made a 357.98 per cent total return, compared with 216.88 per cent from its average IA UK All Companies peer and 231.17 from the FTSE All Share index. It was ranked 18th out of 124 funds in its peer group for the period in question.
But what should investors do now Thomas is permanently stepping away from the fund management industry?
John Husselbee, head of multi-asset at Liontrust, decided to remain invested in AXA Framlington UK Select Opportunities after “a long review”.
“We put suitability, transparency and value for money at the heart of any investment decision, and the change in manager of this fund has met all these tests,” he explained.
“We are comfortable in the knowledge that the fund will continue to be run in the same way – the group has stressed the usual evolution not revolution line and the process and philosophy remain intact – with St John given the opportunity to stamp his mark on this flagship UK equity vehicle.
Husselbee added that he has been “impressed” by AXA Investment Managers’ approach to the manager’s retirement and transparent manner in the handover process.
Performance of AXA Framlington UK Select Opportunities vs sector and index under Thomas
Source: FE Analytics
“St John was named deputy on the fund more than five years ago and it has always been clear he would take over when Thomas chose to retire – further transparency from AXA in its attempts to ensure no surprises,” he said.
“The final endorsement comes from Thomas himself, who has confirmed he will continue to hold 70 per cent of his own personal pension in the fund, making him the largest private individual holder and emphasising his trust in the new leadership.”
Adrian Lowcock, head of personal investing at Willis Owen, said there does not appear to be a compelling reason for existing investors to sell their holdings in AXA Framlington UK Select Opportunities, although new investors might take the time to see how St John settles into the lead role.
“This has been one of the best succession plans in the industry I have ever come across. It takes a lot of common sense to pull it off and recognition from Nigel Thomas that his job is not just about managing investors’ money but ensuring it will be well-managed after he has retired. This is a reflection of the manager’s character,” he added
“Whilst Thomas will be sorely missed by investors as he has served them well over the years, he and AXA have done everything they could possibly do to ensure his departure will go smoothly, so much so that investors should barely even notice a change.”
Richard Philbin, chief investment officer at Wellian Investment Solutions, agreed that AXA IM has done “a really good job in passing the baton” and appears to have picked the right successor to Thomas.
St John’s performance relative to his peer group composite can be seen in the below chart and since the start of 2019 AXA Framlington UK Select Opportunities has outperformed both its average peer and the FTSE All Share (although this is a very short period).
“Chris St John fund has been the deputy on the fund for a long time, has worked with Nigel for a long time and knows how the fund is managed,” Philbin said. “The process is unlikely to change, so it really is business as usual.”
Performance of Chris St John vs peer group composite over 10yrs
Source: FE Analytics
Liontrust’s Husselbee concluded that events such as a fund manager’s retirement should not provoke a knee-jerk reaction from investors but instead a considered deliberation over what to do next.
“The only thing that is constant in life is change, and so it is in fund management. Fund managers are like the rest of us, being subject to job moves, illness and, eventually, retirement,” he said.
“In the prevailing ‘star manager’ culture, however, many investors choose to put their money with an individual rather than a company or an investment process, and this means it can be highly disruptive when a fund manager leaves an asset manager or retires. There will clearly be instances in which selling a fund when a manager leaves is ultimately the right call for investors.
“But given the work that many groups are putting into succession planning – particularly for the leading managers who have been in place for many years – it is worth taking time over these decisions and not immediately rushing for the exit.”