The fund manager merry-go-round continues with several more departing their respective portfolios to...
The fund manager merry-go-round continues with several more departing their respective portfolios to take up new posts elsewhere. In the past few weeks, eight well-known managers have moved house, leaving the replacements to take care of the funds that had become synonymous with their predecessors' names.
HSBC Growth & Income and M&G British Opportunities are just two of the casualties of what is becoming an increasingly transient market.
While the new employers of such managers are sure to be pleased with their acquisitions as they are likely to draw in the investors from that manager's previous funds, many intermediaries and fund of funds managers are getting more than a little tired of the constant movements.
The star culture prevalent in the UK market is such that often the money will follow a big name to the new investment house with few willing to take the chance that the replacement will not be as good as the departing manager. Although the case of Tony Nutt and William Littlewood might have proven this, the opposite can be true as well. Sometimes no replacement is acceptable as it is the unique style of a particular manager that has attracted investors.
The problem with the revolving-door syndrome in the industry is not just one of inconvenience but one of money. While most groups offer free switches into the new fund once the manager has officially arrived and set up again, the damage in some cases has already be done.
Fund of funds operators who follow the manager are in danger of being seen by groups as trading funds too quickly. This can affect the multi-manager's reputation with groups, leading to a lessening of their ability to command discounts on charges, leading to higher charges for the end investor.
Even for intermediaries it can be no cheap thing. While the transfer may be free of initial charge, this is often not the same thing as getting into a fund at creation. There also may be a cost in leaving the original fund. As in the case of Tim Russell's portfolio, a dilution levy can be added to protect remaining investors so that leavers incur a cost. On top of this is the opportunity cost of perhaps being out of the market for some time.
There is no question that competition can be a good thing for the industry. However, the game of chasing stars is fast approaching a time when intermediaries may choose a cheaper option of trackers, where the management is at least assured, or opt for a house where a team-based approach is more stable.
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