Careful succession planning softens the blow of ‘star’ fund manager departures
‘Careful succession planning softens the blow of star fund manager departures’ is a guest post for Investment Quorum and will appeal to those particularly keen and informed upon investment matters.
For many asset management firms, a movement away from having a ‘star’ fund manager to a more team-based approach has been on the agenda over the past few years.
An unplanned fund manager exit can be quite disruptive for funds and their unitholders – firstly, groups have to deal with finding someone to manage in the interim while they decide what to do with the product – should it be taken over by someone else in the team or revamped with a completely new manager?
In the meantime, investors will also be reassessing their options and, if the manager is moving to a rival firm many of them will be prepared to follow.
We have seen assets follow the likes of Jason Pidcock from Newton to Jupiter, with AUM on the Newton Asian Income fund fall from a peak of £5.2bn on 27 February 2015 to halve to £2.3bn (as at 31 October 2016, according to FE) while the mandate at his new firm has swelled to £406m since inception in January.
“Some of the fund management world’s biggest names have moved on or stepped back over the past half-decade”
Georgina Hamilton and George Godber’s surprise departure from Miton saw their UK Value Opportunities fund come down from its peak of £870m at the end of March to £293m (as at 30 November 2016), another indication of just how much of an impact fund manager movements can have on portfolios.
Some of the fund management world’s biggest names have moved on or stepped back over the past half-decade – Neil Woodford, Richard Buxton, Angus Tulloch… and it would seem not all of those group’s involved were prepared.
Training up younger members of the team to bring through to fund management has become a key priority for many groups to avoid such chunky moves in flows.
Rising stars are suddenly being given more prominence in marketing campaigns and there are more and more funds are run by two or three (or even four) lead managers or an entire team are taking responsibility for the stockpicking decisions.
More mature fund managers are taking a step back, particularly when they are named fund manager on a range of funds. They may continue to oversee the desk, but they have loosened the reins on a number of funds letting the emerging talent add some of their own colour to a portfolio.
Sensible succession planning makes complete sense. As already mentioned, Invesco Perpetual had Mark Barnett primed to take on the income mandates following the departure of Woodford, and although AUM has declined in favour of Woodford’s new firm, it could have been a lot worse.
The group has also taken careful steps on its fixed income range to make sure the £30bn of assets under management is spread more thinly across the 24-strong team with co-heads Paul Causer and Paul Read handing mandates to budding fund managers.
“Sensible succession planning makes complete sense”
Industry veteran Tulloch also stepped back from lead management on a number of funds at Stewart Investors’ this year, passing the Asia Pacific Leaders and First State Investments Asia Pacific Leaders funds to David Gait and Sashi Reddy, and the Asia Pacific fund, to Ashish Swarup. However, Tulloch remains co-manager and a member of the investment team, ensuring a smooth transition for unitholders.
Liontrust’s macro team has also carefully prepared for a fund manager approaching retirement. Jan Luthman and Steve Bailey worked together for many years at Walker Crips before welcoming Jamie Clark into the fold in 2003. The trio moved to Liontrust together in 2012 and continued to run the group’s Macro Equity Income and Macro UK Growth funds as a team. This meant investors were able to wish Luthman well in his retirement this summer, rather than panic about changes of strategy and the potential impact of increased redemptions.
While the ‘star’ fund manager culture is far from a thing of the past, fund management firms have become far more strategic in their handling of teams, ensuring the rising talents get their ‘just deserts’.
Those groups who fail to acknowledge the importance of succession planning will continue to see those chunkier flows towards the exit.
‘Careful succession planning softens the blow of star fund manager departures’ is a guest post and the views here do not necessarily concur with those of Investment Quorum. In fact, it is very often the case that we may be largely in disagreement but we respect the opinions of others and value their contribution to the wealth management debate. Guest posts may appeal more to some than others and may often have an industry, stock market or sector knowledge expectation.
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