What to do if your fund manager leaves
When a fund manager steps down or leaves an organisation, it’s natural for investors in the fund to worry. After all, the manager is probably a big part of why you bought the fund in the first place.
In the last several years, a number of big-name moves by the likes of Richard Buxton, Neil Woodford and Angus Tulloch has made this a pertinent topic for investors.
So, what should you do if your manager has announced their departure?
The main piece of advice from the experts is not to panic sell.
“I generally believe that a snap decision is unnecessary in most cases of a fund manager change,” says Darius McDermott, managing director of Fund Calibre, a research company.
“Investors can take their time, weigh up their options and decide calmly what action to take.”
Why are they leaving?
Fund managers leave companies for all sorts of reasons so getting to the bottom of their departure is step one. Are they retiring? Are they moving firm? Are they having a complete career change? Have they been sacked because of poor performance or some other undisclosed reason?
If they’ve been sacked because performance has been bad, this may be a good thing for the fund and its investors. You’ll need to assess the new manager and ask all the relevant questions such as: what experience does the new person have of running this type of fund? What resources will the manager have? Will the investment mandate change? If it does, will the new mandate fit your risk tolerances?
If they’re retiring, you’ll need to find out whether the move has been planned for or not.
“With Ian Spreadbury [a top bond fund manager, who is retiring at the end of 2018], the move was well signalled, a successor was brought onboard three years ago and the retirement announcement shouldn’t have come as a shock to anyone,” says Laura Suter, personal finance analyst at investment platform, AJ Bell.
“But this isn’t always the case, and often when a fund manager leaves there is no clear successor, or they have not been trained up to the same style and processes as the current manager.”
According to Suter, this is when investors need to consider their position.
If the manager is leaving to go to another company, blindly following him or her is not advised.
“While the fund manager is a big part of why you buy a fund there are many other elements that go into it, such as the fund house and its culture, the price of the fund, how many resources the fund manager is given, the size of their team, and many more,” says Suter.
“Investors should compare the new fund house with the old, but also see if the fund manager is running money to exactly the same mandate or whether they are using the move to change their style, investment universe or the amount of risk they take.
“If a fund manager is moving to run a fund with a very similar style, with a similar level of support underneath them, and the parent company is similar, then it may make sense to move your money.”
How important was the manager?
If you’re tempted to jump ship, consider how important the manager was to the overall team.
“The manager is more important in some funds than others,” says Adrian Lowcock, head of personal investing at investment platform Willis Owen.
“But if a manager is only one member of an experienced and wider team then there shouldn’t be much, if any, disruption to the fund’s performance.”
Suter adds: “A number of fund houses have moved to a team approach to managing funds in a bid to protect against the ‘star manager’ culture and stop a flood of outflows when a prominent manager leaves. In these instances, investors need to assess whether the approach to managing the fund is truly a team approach or heavily reliant on one individual. Who is making the decisions and does one person have the final say?”