What To Do When a Fund Manager Quits

ASK THE EXPERT: Several high profile fund manager departures have left investors faced with a difficult decision over the past 18 months

Emma Wall 12 February, 2014 | 7:30AM

Emma Wall: Hello and welcome to the Morningstar Series, Ask the Expert. I'm Emma Wall and here with me today to discuss what happens what your fund manager leaves is Jackie Beard. Hello, Jackie.

Jackie Beard: Hi, Emma.

Wall: So there have been quite a few high profile fund managers leaving investment trusts in the last of 18 months. What should you do when a fund manager leaves?

Beard: Well, the first thing to say is, don't panic. You shouldn't just sell out the holding instantly because the manager left. Because the beauty of the investment trust structure is that you have that Independent Board, who are looking already on your behalf to see who should be appointed as the incoming manager. You shouldn't just have somebody who is plugging that gap appointed by the asset manager to fill that space. The Board can appoint who they think is best for you. So it really does pay to just take a step back, consider and see how it fits with your portfolio.

Wall: Of course, every instance is very different looking at them on a case-by-case basis. Can you give me an example when that transition is being quite smooth?

Beard: So very good recent example is F&C U.S. Smaller Companies (FSC). So Robert Siddles resigned from F&C at the end of 2013 and very unusually the Board came out straightaway with that announcement and said that their intention was to move the trust across to his management, when he joined Jupiter.

So there was no real period of unknown and, yes, there was a period of transition of course, but for the shareholders it's the same fund, it's the same manager, it's a different house and it's a different name, but it's the same man picking the stocks and particularly for small caps, it's very often about the scale of one individual. So for the shareholder, really it's forgone outcome because it's no different, it's just a different name.

Wall: Perhaps an example where the Board has taken slightly longer to make that decision?

Beard: I think really good example is Fidelity China Special Situations (FCSS) and it is unique in the sense that we don't generally have managers saying, I'm going to stop at this particular date in the future. But it's meant that the Board has had long time to decide who they want to continue Anthony's legacy and to pick the right person. It didn’t have to be a Fidelity person. They have been – they are free to pick whoever they wanted.

We've seen them announce last year, I mean well ahead of schedule that Dale Nicholls is going to be taking over. So, for the shareholders they can go and look at Dale Nicholls funds that he is running already. He runs Fidelity Pacific Fund. He has got a track record and is Bronze Rated. Yes, it's not a China fund, but it's an Asian fund that includes China. You can get a sense of his style, his familiarity. You know this is somebody who knows how to construct a portfolio, and as a shareholder you are free to going and make that assessment before he takes over in April.

Wall: Of course, that’s an ideal situation for a Board, having that sort of advanced notice. That’s not always the case, is it? What happens perhaps when they are taken a little bit more by surprise?

Beard: Which, of course, is the normal thing that happens, so, Richard Buxton, another high profile departure, resigned from Schroder UK Growth (SDU) in March last year. Because Richard Buxton worked his notice, the Board said initially, 'Okay, we're going to leave it with Schroders' until the end of that notice period, at which point we'll make another announcement.' And then, in fact, just ahead of Richard leaving, they said, 'We know Julie Dean. We've met her. She will be joining through the Cazenove acquisition, which was completing in July.'

She has a very good track record of her U.K. Opportunities Fund and they confirmed, I think in May, that Julie would be taking over. So, again, as the shareholder, you've got that period of time to assess it now. In this particular case, Julie has quite different style from Richard. But she said very clearly it will be mirroring her Silver Rated U.K. Opportunities Fund. So, you can go and look at that funds, see how it fits with your portfolio and make your decision. But it shouldn’t just be a rash panic decision, 'Oh, My goodness, he has resigned. What should I do now.'

Wall: So, in conclusion then, first thing to do is don’t panic.

Beard: Absolutely.

Wall: The second is wait for the Board's announcement and when the Board does make an announcement, if it’s a fund manager who already has a track record perhaps elsewhere even in a slightly different style, go and check that out and see if that’s for you.

Beard: Absolutely, and remember that with the investment trust, this is where the Boards really do come into their own and add value. You've got a body of people who are specifically looking for the right manager for your fund, and you have to trust them to appoint the right person to match those skills.

Wall: Jackie. Thank you very much.

Beard: Thank you.

Wall: This is Emma Wall for Morningstar. Thank you for watching.


The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Baillie Gifford UK Growth204.02 GBP1.00
Fidelity China Special Ord254.03 GBP1.00
Fidelity Pacific A-Dis-USD39.03 USD0.42
Jupiter US Smaller Companies1,180.02 GBP0.43
Schroder UK Opportunities A Acc4.49 GBP1.05

About Author

Emma Wall  is former Senior International Editor for Morningstar

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