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Thinking of Chasing That Departed Fund Manager?

runaway money 2

So your favourite high-achieving manager has flown the coop and handed over the reins of his fund to a mere also-ran? You think your investments will suffer at the hands of a bunch of new boys?

Think again. A new research document from Aegon suggests that there’s no reason to move your money. Funds run by ‘star managers’, it says, will typically continue out-performing after the star has departed. And there are good reasons for that.

Consider the following:


 

  • A firm’s culture is critical, says Aegon. Key attributes post-handover include:

−    ‘Star managers are not islands – they are supported by a team of analysts originating ideas and technical valuations

−    Such teams often remain in place after a star’s departure

−    Firms take trouble to mentor younger talent and create tomorrow’s stars

  • Firms also have other attributes which will sustain the culture after a manager’s exit:-

−    Investment philosophy

−    Process

−    Global research and ideas

Finally, of course, even in those situations where entire investment teams really do leave, their former employers have every incentive to replace with top manager talent. But then, what else would you expect?


The Proof?

The following Table will give you an idea of how 11 successful funds managed after their managers jumped ship – and as you’ll see, only two of the 11 underperformed their benchmarks during the following years. The statistics are a little skewed by the fact that the new managers naturally took over at different times – meaning that their comparability is a little bit compromised. (For instance, you shouldn’t really compare a rather good 12-month reign like Steve Cordell’s at Schroder European Opportunities with the annual average for a nine-year tenancy like Cedric de Fonclare’s at  Jupiter European Special Situations.)

But the comparisons are still interesting, are they not?

Fund Manager Comparison(Source: Aegon)

You can read the entire document at http://www.aegon.com/Documents/aegon-com/Media/Spotlights/Star-FundManagers-Summary.pdf?epslanguage=en

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