As consolidation grips the asset management industry, the likelihood is that amid the disruption, some fund managers will join companies different to those where they built their reputation.
But that prompts the question as to whether an investor should move their money when a fund manager departs.
There have been high-profile examples in either direction in recent years, with investors following Neil Woodford from Invesco to his new shop, and Alexander Darwall taking billions of capital from Jupiter to his new venture, Devon Equity Management.
Conversely, when Mark Barnett quit Invesco and subsequently resurfaced at Telworth, he managed to raise a rather meagre £20mn in his first year.
Tony Lawrence, who runs the model portfolio service at 7IM, says the key to understanding whether to follow a manager to another company is first to understand why one invested in the first place.
He says: “For example, if we had invested on the basis of the strength of the analysts, or the culture of the firm, or the strength of the systems, etc, we would want to understand the differences at the new outfit. We may already have a view on the culture of the rival that would give us pause.
“What are the motivations for the move? Is it because things were not as rosy at the previous shop, or more driven by money? Stepping back, we are unlikely to invest in the unique appeal of any one individual in the first place. We generally don’t subscribe to the notion of ‘star managers’."
Team-focused approach
Many asset manager have striven to move away from the star fund manager concept and instead try to create a team-focused approach.
But Lawrence’s view is that most funds are really run on a team basis anyway, and so he is wary of just the named manager leaving.
But he says: “Where we would take a more positive view would be whereby a whole team moves. If we can build comfort that all the other trimmings would be equivalent, so systems, culture, support, we would be much more likely to follow.”
Lawrence says even in that scenario he would want to see a lower fund management charge in exchange for supporting a new fund.
Fairview investment consultant Ben Yearsley says: “It is very hard to get a new fund away right now. For a lot of the big buyers, a fund has to be at least £100mn in size before they will invest, and have at least a three-year track record.
“So, if I am going to invest in a new fund, even if the manager was established at a previous firm, then I would want them to be offering a cheap price.”
