What happens when fund managers retire?
Discussion
It depends on what the firm feels is best for their company and unit holders.
The initial consideration is generally how to stem the flow of redemptions.
To mitigate this firms will often create a succession plans months or even years in advance. This is done by adding portfolio managers who take over parts of the portfolio ensuring continuity. This is especially important where the fund manager is a 'star'.
In other cases, firms can decide to merge with an existing fund, poach another fund manager to replace. Closing the fund is a last resort.
The initial consideration is generally how to stem the flow of redemptions.
To mitigate this firms will often create a succession plans months or even years in advance. This is done by adding portfolio managers who take over parts of the portfolio ensuring continuity. This is especially important where the fund manager is a 'star'.
In other cases, firms can decide to merge with an existing fund, poach another fund manager to replace. Closing the fund is a last resort.
Edited by LeoSayer on Wednesday 1st August 09:22
Funds have set objectives that are laid out in its prospectus and these cannot change because the manager leaves.
If you think of a fund as being a company then the manager is the boss, but they work alongside a whole team of other managers and researchers.
If the manager leaves then they will be replaced by another manager experienced in the same sector or (very often) a senior member of the original team.
But the fund still has to stick to its remit, so a UK Equity Income Fund is not going to (and cannot) turn into European Bond Fund, for example.
There are some (often very high profile) funds where the manager has a very wide remit and people are specifically investing in the fund manager rather rather than the fund. This is obviously a different scenario.
Fund management companies will do everything to ensure a successful fund remains so when the manager leaves though. So it will carry on in the same way. The new manager will have their own take and may make different decisions, but whether this results in the same, better or worse performance (under the same market circumstances), no one knows. They will, however, be under immense pressure to follow in the footsteps of the original manager.
If you think of a fund as being a company then the manager is the boss, but they work alongside a whole team of other managers and researchers.
If the manager leaves then they will be replaced by another manager experienced in the same sector or (very often) a senior member of the original team.
But the fund still has to stick to its remit, so a UK Equity Income Fund is not going to (and cannot) turn into European Bond Fund, for example.
There are some (often very high profile) funds where the manager has a very wide remit and people are specifically investing in the fund manager rather rather than the fund. This is obviously a different scenario.
Fund management companies will do everything to ensure a successful fund remains so when the manager leaves though. So it will carry on in the same way. The new manager will have their own take and may make different decisions, but whether this results in the same, better or worse performance (under the same market circumstances), no one knows. They will, however, be under immense pressure to follow in the footsteps of the original manager.
Sitting in the wealth management industry we'd usually stick the fund in such circumstances to a hold, not a straight sell, until we'd seen the fund and found out about their plans for replacement. If it's a star manager name maybe more reason to move, but a lot of funds are quite collegiate in their approach and so potentially less impactful. Once, we'd had a chance to look at matters then a sell/move back to buy would happen.
It's fairly usual to see the underlying stock portfolio remain relatively unchanged for, say, 6 months or so post a leave so you do still reap some of the benefit of the old guy's stock selection and thinking. So no need to rush a decision in most cases.
It's fairly usual to see the underlying stock portfolio remain relatively unchanged for, say, 6 months or so post a leave so you do still reap some of the benefit of the old guy's stock selection and thinking. So no need to rush a decision in most cases.
Orchid1 said:
What happens when a fund manager retires or dies? Does the fund continue with it's original objective or does a new manager take over and steer it in a new direction?
An interesting question. Most fund managers, in the corporate sense, have clearly defined parameters for their funds. Although one person may be the titular head, there will be an agreed mandate, and these days, there’s a big team behind the actual manager. I imagine that it's very unusual for a fund manager to wake up and say "I've had enough", and walk out. More likely, (s)he’s been poached. If the manager gets run over, there should be a continuity/succession plan in place anyway, and the transition should be seamless. I can’t imagine there would be any instant changes in strategy or tactics.
Although it doesn't happen very often, either, there are times when the manager changes the basis on which a particular fund or trust operates. Henderson Global Trust switched to a new benchmark index, increasing its focus on the US and less on the UK, or it could adjust target income or change geographical focus (eg Old Mutual’s China Equity).
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