Asset Allocator has heard something is happening over at Martin Currie, the Scottish asset manager which was acquired by American counterpart Legg Mason in 2014, which was itself bought by Franklin Templeton in 2020.

The Martin Currie brand continues to exist within this nesting doll of fund managers.

One of its funds in particular caught our eye. The manager of the FTF Martin Currie Japan fund Paul Danes, and head of Japan research Reiko Mito, are leaving the company in a significant overhaul of fund which as recently as late 2022 was more than £600mn in size.

The fund was once held by three allocators in our database, but the final one to hold it - Albert E Sharp - sold up recently.

Franklin Templeton informed us that Ferdinand Cheuk and Chen Hsung Khoo will take over on December 17, both of whom are managers of the Luxembourg-domiciled FTF Franklin Japan fund.

The fund will lose its small and mid-cap bent and focus more on large-cap companies – approximately 80 per cent of its portfolio will be restructured. The fund's fee is being cut to 0.7 per cent.

Notably, too, its name will change from FTF Martin Currie Japan Equity to FTF Templeton Japan Equity, marking an end to the original brand.

Asset Allocator thought it worthwhile to find out how this has all come to pass. 

The mandate under scrutiny was run by the so-called 'lone wolf' veteran fund manager Hideo Shiozumi until his retirement in September 2022, when it was taken over by Danes with some assistance from Mito.

It has a small and mid-cap bias, neither of which has fared well at all recently but it was a standout fund during the years when Japan was in the doldrums.

In 2020 it was the third best performing fund in its sector.

But recent performance has not been stellar – Franklin Templeton noted that its five-year returns were 10 per cent behind benchmark and floundering in the bottom quartile of the peer group. 

There have been consistent outflows, too – the fund has shrunk in size from £230mn in January to £150mn in October, according to data from Morningstar. 

As a result, in August, it failed the internal FTF assessment of value test.

The reasons for doing so were as follows: 

“We have concluded that value has not been delivered consistently as a result of the significant underperformance experienced by the fund in each of the last three years and the five years to March 31, 2024,” they wrote.

Slightly unfair, perhaps, given Danes took over just two years ago and continued running the fund with broadly the same style as his predecessor, which happened to be out of favour for a considerable period of time.

James Crocker, head of MPS at Albert E Sharp, said he was invested in the fund before his request for a meeting with the managers was denied.

He said: "The industry is very sceptical about assessment of value reports, not least because there is no common framework or set of metrics on which to base the decisions. In this case, the report was critical about performance in a period before the incumbent managers were employed.”

Crocker claimed he had made several attempts to try and speak with the managers, and said he feared management of the fund was in a state of flux which forced him to switch holdings. “I would have completely understood if Danes and Mito simply walked out after reading the report.

"To have the fee cut based on a performance that predated them must have been infuriating,” he added.

(We asked Franklin Templeton to comment on this, but they had not done so at pixel time)