Artemis Strategic Assets – fund manager change

William Littlewood stepped down as fund manager of the Artemis Strategic Assets fund on 31 December 2020, and also retired from fund management. Kartik Kumar, who has worked with Littlewood on the fund since 2013, has taken over as lead manager.

Kumar joined Artemis in 2012, initially gaining exposure to different investment assets by working with the bond, UK equities and global equities teams. He moved to work specifically on the Strategic Assets fund in 2013, and was later appointed co-manager alongside Littlewood in 2017. He has also co-managed Artemis Alpha Trust, a UK-focused investment trust, since 2018.

How will the fund change?

Kumar will maintain the fund’s longer-term investment philosophy – to provide long-term growth, while offering some shelter to investors’ capital in poor market conditions. He’ll continue to do this by investing across a range of assets, including shares (equities), bonds, commodities and cash.

While the core of the investment process remains the same, Kumar will make some enhancements with the aim of improving returns. In the equities portion of the fund, he’ll continue to look for undervalued companies with longer-term growth potential. These companies are often out of favour with many investors, leading to a lower share price, but Kumar will only invest if he thinks the company can improve in future.

His aim is to focus the fund on only his highest-conviction ideas, while limiting the number of smaller positions that have less of an impact on performance. He will also continue to take ‘short’ positions, which offer the potential to profit if a company’s share price falls, though he wants to increase diversification in this part of the fund. This use of derivatives increases risk.

The rest of the fund invests in bonds, including higher-risk high-yield bonds, commodities and cash. Importantly, this part of the fund should perform differently from the equities portion, offering true diversification. For example, if stock markets go through a tough patch and share prices fall, the other assets in the fund should be expected to offset this to a degree, and provide some shelter from volatility. The manager aims to make some changes to this part of the fund to ensure that’s the case.

The fund has had large short positions in bonds since its launch in 2009. This has detracted from returns as bond prices have risen over this time. While Kumar will maintain some bond shorts, he has already gradually increased diversification, reducing exposure to Japan and skewing the bond shorts in favour of Europe, including France, Germany and the UK.

Kumar will also maintain exposure to different currencies, such as the US dollar and Swedish krona, but will only do so when he feels they’ll provide sufficient diversification against the equities, not as a way to generate significant returns. A small part of the fund will also remain dedicated to commodities, currently gold, platinum and silver.

What does this mean for investors?

Littlewood is a highly experienced multi-asset investor. While it is disappointing to lose this experience, the fund has not performed exactly as expected and returns have disappointed at times. In particular, the fund has not always held up as well as we’d expect in weaker markets.

Kumar has a shorter track record, and we typically prefer fund managers with longer records, who have managed funds throughout a variety of market conditions. That said, he is highly regarded at Artemis, and we view him as a committed, hardworking, and enthusiastic investor.

We also view it as a good thing that Artemis are taking action to try to improve the fund’s performance. While the core investment philosophy hasn’t changed, Kumar will make changes to the fund based on his own views. This may help to improve returns, but of course there are no guarantees.

While the manager will no longer work with the experienced Littlewood, he enjoys working with other fund managers at Artemis, and could benefit from the research and analysis of various global equity and fixed income managers.

The fund does not currently feature on the Wealth Shortlist of funds chosen by our analysts for their long-term performance potential.

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Past performance is not a guide to the future. Source: Lipper IM to 30/11/2020.

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