Let me... manage your investment fund

An investment fund's fortunes ebb and flow with their manager. Should investors panic if a superstar departs?
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The Independent Online

The cult of celebrity has gripped all corners of society and the dry world of investments is not immune. Managers of successful investment funds are regularly elevated to superstar status, with their comings and goings discussed in the industry as avidly as football talks about the latest big-money transfer deals.

The cult of celebrity has gripped all corners of society and the dry world of investments is not immune. Managers of successful investment funds are regularly elevated to superstar status, with their comings and goings discussed in the industry as avidly as football talks about the latest big-money transfer deals.

Fund managers have overall responsibility for managing the investments held in their unit trusts and investment trusts - the funds that make up most investors' stocks and shares ISAs. Many financial advisers watch them very carefully, and will move money out of a fund that has lost a star manager.

Just like footballers, some fund managers build a reputation for solid consistency, some dazzle with a brief spell of strong performance, and some never make it out of the third division. They also switch companies on an increasingly regular basis, particularly the good ones, says Martyn Page, head of research at Countrywide Independent Advisers.

"Successful managers get better offers from their rivals. Moving is generally easy, most asset management houses are based in the City, and it simply means getting off at a different tube station in the morning," he says. So if a top manager leaves, should you switch with them?

"It can be a blow if a good manager leaves, and performance can suffer, so you should consider switching out of the fund. But if you do move remember that you will incur the cost of investing in a new fund, so it is not something to be done lightly," Page says.

Whether you move partly depends on how the asset management house works. Some, notably Jupiter, give individual fund managers great freedom to pick and choose stocks, while others, such as Baring, Britannic and Deutsche, put less emphasis on the individual star and make managers work within a tighter framework.

"In most funds the manager is easily the most pivotal person in the investment process. But somebody like Jupiter gives them a particularly free hand and their role is extremely important," says Jason Hollands, director of financial advisers Best Investment.

Where the fund manager is treated like a star, investors should assess their holdings very carefully if they leave. "But you should still look at it on a case-by-case basis. It depends who has left, and who replaces them," he says.

The most recent high-profile departure was Mark Slater, dismissed from the fund bearing his name, Legg Mason Slater Growth, in October. Early returns on the fund had been impressive, but Hollands says it "has been through a rocky time" recently. "He has been replaced by John Johnston, recently recruited from Murray Johnstone. The new team has a good track record and this fund is still worth watching," he says.

But he gives a thumbs down following the departure of Andrew Gibbs, who is leaving M&G European Smaller Companies. "Gibbs is extremely bright and the success of the fund was largely down to his personal style. His departure is a significant exit, and I no longer recommend this fund."

Top-performing technology fund Henderson Global Technology is losing senior managers Brian Ashford-Russell and Tim Woolley, leaving to form their own investment management company. "This has blown away Henderson's whole strategic advantage. New investors should choose alternative technology funds from Aberdeen, SocGen or Fidelity. Existing investors need not take immediate action, but should monitor Henderson's efforts to offer equally adept management," says Hollands.

Always remember that when one star disappears, another rising star may take their place. Alan Torry left Aberdeen Technology in January 1998 to go to SocGen Technology. He was replaced by John Pullar-Strecker, who has built a strong reputation since.

Similarly, the departure of William Littlewood from the tremendously successful Jupiter Income fund earlier this year caused many a flutter among devotees of his successful investment approach, but nerves were calmed after he was replaced by a proven success in Tony Nutt.

You should not invest in a fund simply because the manager is a star name. Invesco GT European Growth has golden boy Rory Powe at the helm, but the fund has been so successful and grown so large that Invesco itself has warned that it could struggle in future.

"The fund is too big, it doesn't want any more money because it can't manage it properly," says financial adviser Andrew Merricks, partner at Simpsons of Brighton.

He prefers to look for one of the new star managers, and recommends Mark Pignatelli, who joined Schroder European Growth earlier this year. "I have put it on my recomm-ended list because he is there. If you buy now you are buying into an improving fund with a star manager who has a proven track record," he says.

Fund management group Artemis has been tipped as stars of the future by many financial advisers. It launched its first two funds, UK Growth and UK Smaller Companies, managed by Mark Tyndall and John Dodd respectively, in April 1998. Over the last 12 months these funds grew an impressive 61 per cent and 146 per cent respectively. "Small funds can be easier to manage than larger funds and give very strong returns in the right hands," says Merricks.

One type of fund that never relies on a star manager is a tracker. When the FTSE 100 was shooting up at the end of the last decade, these funds outperformed most funds with a manager at the helm. With markets presenting a much more mixed picture, things may be moving against them.

Other star names commonly mentioned by investment specialists are Anthony Bolton at Fidelity European and also Fidelity Special Situations, and Roger Guy with Gartmore European Selected Opportunities.

But remember that even the biggest star name is not a one-man band. All are backed with large research teams and must work towards strategic goals set by their asset management house. Total freedom is an illusion.

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