Manager and team movements have encouraged clients to invest in multi-manager products to avoid incurring switching costs
A large amount of fund manager and team movement is making it difficult for advisers to invest on historical management strength which, in turn, is fuelling the launch of multi- manager products.
High profile names face many reasons to change jobs and small or medium-sized advisers lack the resources to monitor these movements adequately. Investors are often reluctant to take the costs of switching funds to stick with the same manager.
There are four reasons for a manager to move or leave the industry, according to Bambos Hambi, director, head of portfolio services at Rothschild Asset Management.
Some managers do not like working for larger organisations where they may have to spend an increasing amount of time in meetings, he said. There are an increasing number of large organisations due to mergers and acquisitions in the industry.
There is also increasing competition between companies for the best managers due to poor market conditions, he added. Retail managers are particularly sought after because many companies regard this area of business as having higher margins than the institutional side.
Recent moves between companies have included Tim Russell and his team and Chris Rice moving from HSBC to Cazenove, Nigel Thomas and George Luckraft moving from ABN Amro to Framlington, Adrian Patterson moving from Jupiter to Artemis, Theodora Zemek moving from M&G to New Star, James Gledhill moving from Morley to New Star, Stephen Whittaker moving from Invesco Perpetual to New Star, Neil Pegrum moving from M&G to Insight and Chris Burvill moving from Investec to Gartmore.
The hedge fund industry is also responsible for enticing a number of managers away. This can be because they have been running long-only money for some time and want a new challenge, or because hedge funds offer a stake in the company and the possibility of earning much better money through performance fees.
Recent moves of this type have included John Muresianu who left Fidelity to launch a hedge fund.
Groups such as Threadneedle and Gartmore have launched their own hedge funds in order to stop their best managers from leaving, said Hambi. This can create a conflict of interest with long-only managers also managing hedge funds.
Other managers are leaving the industry altogether as a lifestyle choice because it is difficult to make money and they face greater pressure in current market conditions.
'Many take the view that even if markets recover, it will be a while before investors recover their confidence,' he said.
Recent moves of this type have included Gary West who left JP Morgan Fleming and Vivian Bazalgette who left M&G.
The increasing manager movement has helped to fuel the growth of multi-manager products, according to Hambi.
Small and medium-sized financial advisers do not have the resources to monitor fund manager movements properly so often prefer the multi-manager route where they can rely on the management company to do that job for them, he said.
If advisers invest directly into traditional funds they take the risk of manager movement or even whole team movement, which is also increasing, he added.
For asset management companies, manager and team movement often means greater costs. 'They may have to dig deeper into their pockets to get a replacement,' he said.
The amount of fund manager movement has made life difficult for advisers, according to Liz Walkington, communications manager at RJ Temple.
Investing in multi-manager products and house style funds is an option for advisers unwilling to take the risk of manager movement, she said.
RJ Temple does invest in funds on the strength of the manager. If a manager moves, its general policy is to keep existing money with the new manager rather than have clients face the costs of moving, and invest new assets with the manager who has moved.
When a manager leaves, even if the replacement is good, there can still be problems, according to Walkington.
'If an adviser keeps their money in the fund but other investors pull out in a panic, the fund could be forced to sell many of its best positions to pay redemptions, and that will affect performance,' she said.
Stewart Brooke, senior partner at Brooke, Christian & Co, believes the problem of managers moving can be reduced if there is a solid team behind them that remains with the new manager.
The team can lead to continuity in the fund's investment policy and while it might suffer in the short-term due to investor redemptions, it is more likely to pick up in the longer-term.
Most of the firm's clients are invested in multi-manager products, he added.
Using multi-manager products means there is less of a problem if a manager leaves because the assets are spread, he said.
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