Investors on the case as fund supremos ship out

If a manager moves, asks Melanie Bien, should you follow him to his new firm?

The cult of the individual has come into sharp focus in the past month, with at least 10 fund managers leaving their investment houses and moving elsewhere (see below). So what should investors do - follow the person who has overseen good performance, or stay put in the hope that the fund will carry on the good work?

"People shouldn't rush into making a decision to switch their funds because it can be very expensive for them," advises Robert Harley, fund analyst at independent financial adviser (IFA) Bestinvest. But that doesn't mean you should do nothing. "The action you eventually take should depend on the fund and who the manager was," he adds. "Some have a very distinctive style, and their replacement might manage in a very different way. In that instance, there may be a case for following the manager to his new fund."

In particular, he singles out Richard Woolnough, who managed Old Mutual's UK Fixed Interest and Corporate Bond funds. He has moved to M&G's fixed-interest team. "With fixed interest, the asset class is less volatile than equities, so there may be less of a case for following the manager," says Mr Harley. "But some fixed-interest managers have more freedom, such as Mr Woolnough. I think he will be very difficult to replace. The question is, if you give his replacement the same freedom he had, will they be able to take advantage of this?"

Patrick Connolly, director at IFA Chartwell Investment, says he will also be keeping a close eye on the Old Mu- tual Corporate Bond fund. "We have a lot of client money tied up in it ... We usually allow six months for a new manager to bed in and see how he does before taking a decision on whether to move."

However, while he generally advises investors not to make rash decisions, Mr Connolly admits that in some cases prompt action is necessary. "When Tim Russell left the HSBC Growth and Income fund [at the end of last year to join Cazenove], he took his team with him. So we withdrew investors' money fairly quickly after that - just a few weeks later," he says. "In most cases the decision is not as clear-cut as that, but we couldn't see where HSBC was going to find a whole new team to take over.

"It's the same with a football team: it is much easier to replace one person than a whole side. If the fund manager takes a team with him, you have to wonder whether they can all be replaced."

Whether a manager makes all the decisions in running a fund or is helped out by a team of people, what is clear is that you need to keep a close eye on who is investing your money. Only then, when there is a change in management, can you know what to do.

You can follow what fund managers are up to at "manager moves" on Bestinvest's website (www.bestinvest.co.uk). Or if you haven't got the time or inclination to do this yourself, you should make sure you have an IFA doing it for you.

Comments