St. James's Place Value Assessment

This week St. James’s Place published their Value Assessment which is designed to determine that clients are receiving value for money and forms one of the annual requirements of the Financial Conduct Authority. It looks at seven areas of assessment but the most important is probably performance against benchmarks after charges over the last five years.

St. James’s Place have 39 fund strategies manged by 81 fund managers around the globe. Irongate is an independently owned firm that took the decision over twenty years to partner up with St. James’s Place to access their range of services partly for their administration and authorisation with the Financial Conduct Authority, but mainly for their approach to Investment Management. St. James’s Place’s identification of investment managers and just as importantly, their continued investment monitoring is second to none and something that is very hard to replicate on the same scale anywhere else.  In 2019 the committee met 22 times and their investment team held 627 fund manager meetings throughout the year. Daily oversight is maintained through both internal and external consultants to ensure that the fund managers are in tune to their investment briefs and performance objectives.

Irongate have “carte blanche” as to which of the St. James’s Place managers we wish to use for our clients  and we have three “core” bespoke portfolios, Total Return, which is a balanced portfolio aimed at growth; Income & Growth, which again takes a balanced approach through diversification of asset classes in equities, fixed interest and property and has a dividend yield of 3.4% (FE Analytics 31/06/2020)* and Global Equity, which is purely share based and designed for longer term growth. We favour global managers, by which I mean those that have a mandate to buy any company share they wish wherever it is listed. In other words, they are not restricted by geography or have to only buy shares listed on one exchange, for example the FTSE 100 index. As such our managers and as a result the portfolios take a “bottom-up” approach and do not therefore closely mirror any benchmark or index.  This can be demonstrated through their “active share” which is a measure of the percentage of a fund managers stock holding that differs from their benchmark index, where 0 would be a tracker fund.  The Active share of the three portfolios above are 86%, 81% & 87% respectively.

Many of our clients have bespoke portfolios based on their unique circumstances and requirements but their holdings will in the main be made up of our favoured managers.  We currently favour 12 of the 39 strategies which are managed by 21 managers.  Around three quarters of the managers recommended by Irongate are included in strategies or funds exclusive only to clients of St. James’s Place  and not available otherwise to UK retail investors.

There are three categories in the fund performance assessment; The first being Green that indicates the fund managers that have produced good returns and good overall value to clients.

The second is Yellow where the fund managers have returned good overall value for money, but some level of additional monitoring may be required. For example, the Balanced Managed Fund recently changed its underlying fund managers to GMO and Jennison Associates back in 2018 and as such has not yet had five years under the new team. Following the change of manager Irongate included the fund in our Total Return Portfolio.

The final category is Red and is reserved as you might guess for those managers who have underperformed and therefore will not have offered value for money. These are clearly under review. Actually, all the managers are constantly under review which is the role of the investment committee. Of the 12 strategies that we use, 7 are classified as green, 3 as yellow and 2 as red.

As outlined above one of the yellows is the Balanced Manged Fund that we now favour due to the change of managers and which has outperformed its sector. It is included as it offers “alternatives” which helps diversify the range of assets over equities and fixed interest. Another is the Global Fund run by Artisan who are classified as a “Value” manager, ones who seeks to buy stocks which trade at a significant discount to their intrinsic value. Value investing is often seen to exploit the irrational behaviour of investors and as such will often underperform in the short term when fear is in the ascendancy as has occurred this year. Warren Buffet is probably the most well-known “Value” Investor. The alternative to Value investing is “Growth” investing that typically concentrates on fast growing companies whose earnings are expected to increase at an above average rate. Many of these managers will say that they cross over with value investors as they too will be looking at buying shares at attractive prices. The two strategies can be blurred, but in general you will find that Amazon would be a growth company whilst the older dividend Blue Chips such as Proctor & Gamble would be classed as value for their steady rise in price.  

Launched in 2007 the first ten years of growth saw the Artisan Global Fund outperform the MSCI World index (** Jan 2007 – Jan 2017 FE Analytics) but it has underperformed by quite a margin this year. However, I would expect this fund to recover form once the world starts working again.

The Diversified Bond fund strategy is also classified as yellow providing overall value for clients but is being closely monitored. Bond funds generally are being reconsidered at Irongate. In general bond prices rise as interest rates fall which has resulted in a very long bond bull market, but they go in reverse when interest rate rise. This is likely to be some way off happening, but I would be surprised if the next few years produced anything other than low single digit returns from bonds.  However, bonds do have a role to play in client portfolios who are seeking a balanced and medium risk approach. But that is why we have the Global Equity portfolio that has no bonds within it. It has been the better performing portfolio back tested over five years and is also rated as medium risk. (*FE Analytics 30/06/2000)

Only two of the strategies we have favoured are in the Red zone. One is an old favourite, Nick Purves of RWC Partners. Nick’s aim has been to provide an above average level of income from predominantly UK shares but with some exposure to overseas equities. As such this fund does not quite fit our global mandate but as UK companies tend to return profits to investors more so via higher dividends it has been included in portfolios for clients seeking income. He has been an excellent manager has had doubled the total return including dividends of the FT Allshare Index since the beginning of 2000 until the end of 2016 ***. (FE Analytics). Up until this time the return of the FT Allshare Index and the MSCI World Index were similar at 110% and 120 % respectively. Nick produced dividend annualised dividend of 3.9% which grew on average by 4.4% p.a. outstripping inflation. (31/12/2001 – 31/12/2017 RWC)

However, following the result of the UK Referendum, UK markets have diverged negatively against the MSCI and this has affected UK managers. On top of this as another Value investor Nick has suffered further due to the virus and the fact that the UK markets have few what would be considered growth companies and too much in energy, financials and oil companies and virtually none in the technology sector that has helped raise the S&P 500 index.  Whilst fifty percent of FTSE 100 companies have reduced or stopped their dividend, the Equity Income fund as at 30th June has a dividend yield of 6%.  For those seeking income this is still a good play. It is worth noting that the total return of the FTSE 100 index has all come from dividends – the capital value of the leading 100 company index is lower than it was at the start of 2000. But those companies would have produced a very decent inflation proofed income in that time thereby achieving value for those for whom income was a priority.

The Multi-Asset fund is the second of the Red funds. This was included on our portfolios to provide some element of negative correlation with markets. Traditionally fixed interest was considered in this category and when equities turned negative, fixed interest would act as a foil and move positive, or so the theory went. All of this went out of the window following the 2008 Great Recession since when interest rates have fallen 98% and all assets seem to be positively correlated and move up and down together! The aim of including “Alternatives” to the portfolios or alternative strategies was to counter this to a degree. Much of the underperformance has been from the overly cautious stance taken by one of the managers, Schroders. St. James’s Place   are actively looking at altering the strategy but I think we at Irongate will be removing the Multi Asset fund from our portfolios. It was hoped that it might replace cash in the portfolio, which itself has a role to play but since launch in April 2012 the fund has remained flat after charges, neither gaining or falling. Whilst the fund has not achieved St. James’s Place’s desired requirement for capital growth the fund has performed in line with its sector.


In summary, 83% of Irongate’s chosen funds offer either good or overall good value for our clients over the last five years according to the assessment. Of the two who did not, one was flat, and the other has been struck by adverse circumstances in the shorter term beyond his control. I wanted to highlight this because this report has just been issued and as sure as eggs are eggs the financial press in their typically negative way of reporting will scream out that 50% of St. James’s Place   funds underperform, when in fact just 5 of their 39 strategies fell into the red category and I think it is important to understand why. Further Irongate is one of over 2500 practices that is regulated through St. James’s Place and independently from the others manage their client portfolios in their own unique style. The portfolios are reviewed quarterly with the assistance of the investment management team at St. James’s Place. Individual client portfolios are actively reviewed directly with clients by Irongate advisers and adjusted accordingly in line with our forward looking strategy.

Because of the weightings of the chosen mangers within the Irongate strategies 92% of the Global Equity Portfolio falls within the Green category, 85% for the Income & Growth Strategy and 82% for the Total Return Strategy.

You can find further details of the report and the investment management approach of St. James’s Place   by going to and clicking on the Products & Services tab and then the Investment Management Approach sub tab. The second video hosted by Chris Ralph the Chief Investment Officer is worth watching.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.