When was the last time you heard a fund management company complain about the amount of new business...
When was the last time you heard a fund management company complain about the amount of new business it is getting? Probably never you may think, but it is becoming an increasing issue for groups today and in many cases is linked to the apparent rush of fund managers leaving the retail market to establish hedge funds.
A dilemma for many groups is that while they may have great sympathy with managers asking to put a cap on fund sizes, as every good marketing director or managing director knows, when your funds are hot your board or shareholders are not going to thank you for turning away new business.
This week we have seen the departure of the three senior members of Henderson's technology team, mainly due to the fact that they felt they had too much money to run. Henderson felt it could not turn away new money and while the correction in the markets may have taken the pressure off a little, a wall of new money will no doubt be heading towards the funds. The nature of Henderson's investment process now under the experienced Roger Yates means the remaining in-house talent spread across the geographical desks should be able to manage the situation well in the short term before they decide on the long-term strategy. But the situation does create the short-term problem for advisers on what to do with client money and it has been a little unnerving to hear some more high profile advisers recommending a switch immediately into other groups' tech funds without first hearing Henderson's solutions.
More importantly it does raise the issue of putting client money into other large and rapidly growing funds, and unfortunately there is no clear answer to this. Jupiter Income's William Littlewood was exhausted by the process of running a £1bn-plus fund and certainly in his final months this pressure impacted on the fund's performance. Jupiter perceptively switched Tony Nutt to take on the portfolio and he has rewarded their faith with some strong performance, because he has had the experience of running this size of fund. He and his team have the experience and obviously enjoy the challenge.
Rory Powe and his European team show exceptional consistency in running the £3bn European Growth Trust as part of a European equities portfolio of $22bn in total. The interesting thing will be to see that in a high growth area like technology, if other fund managers are going to find the strain of running an ever increasing fund too much and follow Henderson's team down the road to niche boutique management. That is where, as advisers, you can really add value to your clients where the direct players are not able to.
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