Like stock picking, the cult of the star fund manager is back in fashion. Look no further than the p...
Like stock picking, the cult of the star fund manager is back in fashion. Look no further than the phenomenon that is New Star and the excitement surrounding each big name it hires. All of which has happened against the most dreadful market performance seen in many a year. Where would Credit Suisse Asset Management be without Bill Mott?
In a month in which ABN Amro's Nigel Thomas and George Luckraft and SG's Dino Fuschillo and Peter Seabrook are all off to pastures new, more of a focus should fall on the succession policy fund groups have in place should their stars move to a different orbit.
No group can guarantee a manager will stay but it can guarantee what it would do should that manager leave. In fact, it is the least an adviser needs to know, particularly as incentive tie-ins have proven no reliable guide to whether a manager will be at the helm of a fund for the long haul.
Succession planning is a virtue in personal finance and within business there is a whole industry devoted to assessing where risks to companies lie and working out contingency plans in advance.
Sadly, the wisdom of these two approaches seems to have bypassed a number of the UK's fund management groups. In an Investment Week survey of UK investment houses whose funds attract the bulk of intermediary money, several groups would not outline their succession plans or did not have any.
Neither Invesco Perpetual nor Schroders would comment on succession plans for Neil Woodford, Stephen Whittaker, Paul Read, Paul Causer, Humphrey van der Klugt and Andy Brough, for example. Credit Suisse has no substitute lined up in case Bill Mott leaves and ABN Amro had no plan in place should the unthinkable happen and Luckcraft and Thomas go.
This lack of contingency planning is potentially damaging to clients. It could leave them in a fund with no direction and facing front-end charges if they have to move to another portfolio.
The lack of transparency by some groups is often accompanied by the excuse that to reveal a deputy would start a panic because investors would worry that the lead manager is about to depart. This is a false argument: transparency and a willingness to be upfront are actually virtues in a business relationship. Plenty of investment groups criticise with-profits policies for their opaque structure and lack of clarity as to where future returns are generated. If they are not willing to divulge their succession policy to their clients, they are no better than the life companies they criticise.
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