First State Stewart (FSS) has split in two in a bid to preserve its investment culture following its rapid rise.   

One team will be based in Hong Kong and include the likes of Martin Lau and the other in Edinburgh, which houses Angus Tulloch (pictured) and has around 20 members.

Meanwhile, renowned emerging market equity investor Jonathan Asante is expected to relocate to the UK in 2015/16.  

The UK-based team will rebrand Stewart Investors and the Asian team will take on FSS Asia name. Both units will report to First State Investments CEO Mark Lazberger.

First State's Asia Pacific fund launched in 1988 and it was not until 2003 that the firm had a presence on the Asia floor.  

'Burden of scale'

FSS said the restructure had been planned over a number of years as the group contended with 'burden of scale'.

'[The team] has been disciplined in their management of funds, closing funds to new investment to prevent capacity issues impacting the performance so that the interests of existing investors are protected,' FSS said in a letter to clients.  

'They have also benefitted from being a relatively small and dynamic investment team but the growth in funds has necessitated growth in the team. The next step is to split the team in two and allow each to move forward as smaller, flexible businesses.'

FSS believes this separation creates opportunities for further growth, while allowing the two divisions to keep their own identity and autonomy. There will be no linkage of research between the two successor teams.  

In his letter, FSS managing partner Stuart Paul said: 'Scale is the enemy of investment returns and the history of our industry is littered with examples of businesses which over-stretched themselves.

He added: 'Much of our succession planning has centred on the creation of three distinct investment groups within our team. We refer to these as Asia Pacific, GEM/Worldwide and Sustainability.

'Central to our thinking has been the need to remain small and informal in how we make investment decisions and to avoid the creep of hierarchy and formulaic process.'

Portfolio changes

There will be no changes to portfolio management, with most Asia Pacific funds managed by Stewart Investors. The single country mandates such as Lau's Greater China fund will be managed by FSS Asia.

FSS said it had no plans to reopen any of the funds that had been soft-closed on capacity concerns, including Tulloch's Asia Pacific Leaders fund.

It also indicated the restructure was not a precursor to Tulloch taking more of a backseat role. 'Angus recently celebrated his 65th birthday and remains committed to the business and our clients,' it said.

There will be minimal changes to portfolio management responsibilities, with David Gait replacing Richard Jones as co-manager Asia Pacific Leaders the only significant change.