By Sinead Cruise and Tommy Wilkes
LONDON (Reuters) - Investors rattled by unpredictable global markets are losing faith in star managers to shield them from painful losses, with some of the industry's best known names topping a list of funds which hemorrhaged cash in 2011, Lipper data shows.
Edouard Carmignac, the investment veteran who founded funds firm Carmignac Gestion, and Sanjeev Shah, the Fidelity Worldwide Investments trailblazer, are among those who struggled to maintain cult followings, after a flight to safety tempted fans to switch into cash and other passive products.
Carmignac's 5.7-billion-pound Investissement A Fund suffered the equivalent of 919.3 million pounds of net outflows in the year to December 31, the second-largest spate of annual redemptions recorded by all mutual funds available for sale in the UK, the data from Lipper shows.
Investors pulled 491 million pounds from Shah's 2.2-billion-pound Special Situations Acc Fund over 2011, the 17th largest loss in absolute terms of all the 6,400-plus funds tracked by the data.
Andrew Whiteley, director at financial advisor Provisio, said managers' failure to navigate volatile markets last year, as well as growing investor awareness about cheaper products, was combining to hit demand for these long-celebrated names.
"Many 'star' managers were caught without shorts when the tide went out (in 2011) and I think that investors have started to look at cost as a filter for fund selection ahead of performance," he said.
Failing to beat even benchmarks last year is hurting reputations, especially at a time when more and more investors are turning to exchange traded funds (ETFs), which trade like stocks and offer less-costly index exposure.
Carmignac's fund dropped 12.87 percent last year, underperforming the MSCI AC World CR USD index, while Shah's fund slumped 14.61 percent versus a 4.17 percent fall in the FTSE All-Share TR index, Lipper data shows.
"As an equity fund, Carmignac Investissement A was naturally affected in 2011 by the general rise in risk aversion among European investors. Consequently, the Fund suffered some outflows," Investment Committee Member Didier St Georges said.
Shah, who stepped into Anthony Bolton's shoes to run the UK portion of the Special Situations fund, said strong momentum bias in markets had hurt his investment style.
The fund saw some larger, institutional investors shift money out of the fund as a result of asset allocation, a Fidelity spokesperson added.
Other star managers to lose pulling power last year included Will Landers, the BlackRock manager whose BGF Latin American Fund A2 USD suffered the biggest investor exodus in absolute terms in 2011. The fund lost the equivalent of 938 million pounds and now runs 2.97 billion pounds, the Lipper data showed.
BlackRock blamed the outflows on European volatility but said they expected Latin America to outperform relative to global equity markets when markets stabilized, as was the case during the turmoil of 2008 and 2009.
Aled Smith, manager of M&G's 1.23-billion-pound American A Inc fund, lost the equivalent of 781 million pounds, ranking it in seventh spot, according to the Lipper data.
M&G said Smith's 3-5 year investment approach faced performance headwinds in 2011 as the market chased perceived safety and immediate cash returns at the expense of the long term picture of individual companies, no matter how sound.
JP Morgan Asset Management provided its own numbers for Austin Forey's $6.32-billion Emerging Markets Equity Fund, which saw $1.48 billion leave, a larger outflow in absolute terms than that posted by BlackRock's Will Landers.
"We did see some European institutional investors completely reduce their emerging markets (EM) exposure in an indiscriminate manner across all funds, not just this particular fund. In many cases they sold out of all their EM holdings," Emily Whiting, client portfolio manager at JP Morgan, said.
Much of the money flowed into bond and liquidity funds, though some has started to trickle back this year, she added.
It wasn't just individual names who suffered hefty outflows. Some fund firms had several products in the top 50, indicating a fall in the pulling power of a brand as well as a star manager.
The asset management arm of UBS, the Swiss bank shaken by a rogue trader scandal, suffered extensive outflows in several funds, including money market funds.
The firm's 3.09-billion-pound UBS (Lux) Money Market Fund - USD P-acc lost the equivalent of 897 million pounds, the third largest outflow of any fund, according to Lipper data.
The UBS (Lux) Money Market Fund CHF P-acc shed the equivalent of 357 million pounds, leaving it with just 877 million in December. The Euro version lost 480 million, to end the year managing 1.69 billion pounds, the data shows.
Meanwhile, UBS watched 288 million pounds leave its 316 million pounds (Lux) Eq Fd - Emerging Markets (USD) P-acc fund, and 225 million pounds leave its (Lux) Eq Fd - Euro Co Multi Strategy fund, which now manages the equivalent of 642 million pounds.
UBS confirmed the numbers but declined to comment further.
(Editing by Mark Potter)