Review for external funds

When a third-party fund sees staff leave or performance slip, SEB adopts a tough approach. Simon Hildrey reports. The debate on whether intermediaries should choose funds according to a star manager or the strength of the team and investment process has moved up a notch in Europe. Swedish bank SEB is the latest large-scale distributor to add fuel to the discussion. The Scandinavian institution has revealed that if it is selling a third-party fund and the manager leaves, the performance of the product is placed “under review” for at least six months. “If the fund drifts away from the investment style we expected, or performance declines more than can be attributed to market conditions, we take it off our list,” said Bengt Bergholtz, SEB’s head of external funds. SEB has only been selling external funds for the past two years. But it has already placed a number under review. As well as personnel issues, shifts in performance, philosophy and risk controls can trigger a review. “We want to know how portfolios are constructed and how the fund managers treat the issue of risk. That is the key,” revealed Mr Bergholtz.