Manager Research

You may recall we changed the rating on the Cadiz Absolute Yield fund last year from a Tier 1 to a Tier 2.  This was on the back of concerns regarding the business and the declining assets under management.  We were still comfortable with the portfolio manager, the team and their process. However the extent of the uncertainty relating to the future direction of the business and the resultant potential for staff losses made us cautious.

Cadiz then issued a SENS announcement on 21 November 2014 to announce certain changes to their board and that a full review of the Cadiz business would be conducted.  This followed Blackstar acquiring a stake in Cadiz. 

The review has now been completed and there are a range of strategic initiatives underway at Cadiz and certain key changes, including the following:

- Frank Cadiz has resigned as CEO, and will be leaving at the end March.  Brian Wootton will replace him - he was added as a non-executive director late last year,
and brings 20 years' experience in executive management positions in the media, publishing and retail sectors.  The lack of specific asset management experience is a concern.

- Evan Jones is brought back into the business with the title Executive: Strategy and Implementation - Evan left the business last year, and consulted back on Cadiz’s Enterprise Development offering.   

- Cadiz will also start the process of outsourcing their administration to a third party, and staff numbers will reduce materially over time as a result. 

The continued change at Cadiz concerns us.  An outsourced administration model makes sense for a business of Cadiz size, and the other changes may end up as positives long term. But it is not positive for the business that there will be constant change and uncertainty for at least the next year as the changes are implemented.  Changes of this nature can often lead to staff losses or a loss of focus on the job of actually managing investments. 

We have retained the Tier 2 rating on the back of our belief in the fixed income team and the way they implement their process, but will watch any investment team changes very carefully.