From Envestnet PMC: Tanner Howard, CFA, Senior Investment Analyst
“Summary
- Envestnet | PMC (“PMC”) will be adding the “Watch” attribute to the Redwood US Small Cap Growth SMA, effective immediately, following a sharp decline in strategy assets.
- It was recently announced that Redwood was being replaced as the sole sub-advisor on the John Hancock Small Cap Growth mutual fund. With the formal replacement set to take place in the coming days, total strategy assets at Redwood are due to drop significantly.
Rationale
On September 28, 2023, John Hancock Investment Management (JHIM) announced their intentions to replace Redwood Investments (Redwood) as the sole sub-advisor for the John Hancock Small Cap Growth mutual fund. At that time, PMC removed the JHIM mutual fund from our Select List and began assessing the impact for Redwood and their Small Cap Growth strategy as a whole.
With the sub-advisory change going into effect last week, PMC now has a clear picture of the change’s impact on Redwood’s AUM. Strategy AUM was just under $600 million prior to the change, but with roughly $400 million exiting via the transition, strategy assets are now roughly $175 million.
PMC feels it is prudent to place the strategy on our Watch List due to the decline in AUM. It introduces concerns around the longevity of the strategy as a going concern (particularly if the trajectory of flows remains negative) and team morale. Redwood has reaffirmed their commitment to supporting the strategy (which was once the firm’s flagship) and PMC has yet to see any evidence of declining team morale, but will continue to monitor the situation over the coming months.”
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