Wealth Shortlist Update: TM CRUX European Special Situations

We’ve taken the decision to remove the TM CRUX European Special Situations fund from the Wealth Shortlist.

We believe that Richard Pease, the fund’s lead manager, has built a long and successful track record investing in Europe. He is supported by James Milne and Roland Grender, who bring a good level of experience to the table. However, our conviction around the fund’s performance and investment process has been tested in recent years.

Pease’s fund management experience stems back over three decades. This fund launched in 2009 during Pease’s time at Henderson Global Investors. He left the firm in 2014 to help set up CRUX Asset Management and took the fund with him. It was renamed as the TM CRUX European Special Situations fund in June 2015.

The fund has performed better than the European stock market since launch in 2009, but performance in recent years has been lacklustre. Performance is behind the average fund in the IA Europe ex UK sector and the FTSE World Europe ex UK over the past six years.

Our analysis shows this is partly a result of the managers’ stock selection - a key factor we analyse when assessing a fund manager, which shows their ability to pick strong performing companies regardless of what size or sector they’re in. In our view, the managers’ stock picking has been weaker than we expect and detracted from performance over this six year period.

Our analysis shows Pease has in the past added most value by investing in medium-sized companies, and those in the industrials sector. However, investments in these areas have been key detractors from performance in more recent years.

We also feel the team has at times deviated from their tried-and-tested ‘four pillar’ investment process. The managers can invest up to 20% of the fund in non-European companies. While this flexibility has the potential to enhance returns, some of these investments haven’t been aligned with the ‘four pillars’, including the quality of management pillar, and detracted from performance.

Over the longer term the fund has tended to hold up better than the stock market when it falls but lag a rapidly rising market. This has not occurred in recent years and overall, we have been disappointed with performance. Over the longer-term Pease has built a successful record of investing in Europe, but performance has fallen outside of our expectations over the last six years. Importantly, our analysis also shows the drivers of performance in the past differs from what we’ve seen in recent years.

We’ve continued to speak with Pease and the team frequently about performance. They acknowledge some mistakes have been made and have taken action, for example, by selling companies they would not typically invest in and have sought to refocus on the core principles of their process.

While this means the fund has the potential to do well in the future, our lowered conviction means we have decided to remove the fund from the Wealth Shortlist. We will continue to monitor performance and let investors know if our views change.

This isn't a recommendation to make any changes to a portfolio. Investors should make sure any investments match their investment goals and attitude to risk and are held as part of a diversified portfolio. If you're not sure if an investment is suitable for your circumstances, please seek advice.

Past performance is not a guide to the future. Source: Lipper IM to 31/08/2022.

Find out more about TM CRUX European Special Situations, including charges

TM CRUX European Special Situations Key Investor Information