What happens when the top man leaves?
Steve Jobs's temporary departure from Apple exposes the risks faced by companies that are defined by their leaders. Chiara Cavaglieri reports
Sunday 23 January 2011
Steve Jobs's departure on medical grounds from Apple shook the investment world last week.
Although his illness with cancer has been well known, Jobs's leaving still caused shares in one of the world's most successful consumer technology firms to fall 6 per cent, wiping billions off the company's value. Despite Apple having armies of executives and developers, it seems that the cult of the person at the top goes on.
Jobs is a prime example of how significant a single individual can be. This level of dependence forces investors to question whether a company with a key person can continue without them.
"There are risks involved if you're backing a one-man band," says David Kuo, the director of financial website Fool.co.uk. Steve Jobs is a classic example: a visionary chief executive who reinvigorated Apple following his return to the company.
Twitchy investors can rest easy if Jobs's previous absence in 2009 is any indication. Then he left for six months for a liver transplant to replace an organ damaged by pancreatic cancer. Any damage to the share price was short term. If this leave is more permanent, however, the question for investors is whether Jobs really is irreplaceable.
Many fund managers hold similarly important positions within their organisations and therefore potentially pose the same risk. Examples of this danger include Neil Pegrum quitting Insight Investment fund in 2004; the company closed the fund rather than bring in someone new. More recently, Gartmore's clients were quick to pull their money out after its star fund manager, Roger Guy, retired in November after 17 years. The company had little choice but to sell itself to rival Henderson.
Such stars will always be able to bolster value and also render that company or fund vulnerable should they up sticks. So which people in the fund management and company universes do investors need to be aware of?
Neil Woodford, 50, a fund manager at Invesco Perpetual, has been at it for over 20 years and has control of assets worth £18bn with his two main funds, the Invesco Perpetual High Income fund and the Invesco Perpetual Income fund.
"Invesco probably has the biggest problem of any fund group in the UK. If Woodford leaves, a large amount of money will probably walk out the door at the same time," says Ben Yearsley, an investment manager at Hargreaves Lansdown.
Despite well-documented periods of underperformance, Woodford is known for his emphasis on long-term returns and his funds have an outstanding track record. Even with a strong team of capable managers, Yearsley warns, losing Woodford would undoubtedly have an impact.
"The problem for them is he has been so good over the past two decades with investors buying the fund for him; whoever follows will definitely have a poisoned chalice."
Fidelity China Special Situations
Rarely has the term "legendary fund manager" been more applicable than to Anthony Bolton, 60, who spent 28 years in charge of his flagship fund Fidelity Special Situations. Bolton will long be remembered for giving investors an average annual return of 19.5 per cent – compared with 13.5 per cent from the FTSE All-Share Index – before retiring from the fund at the end of 2007 which led to Fidelity splitting the fund to halve its size.
Bolton has since returned to head the £570m China fund launched last year, and it was his name that drew in record amounts of cash. However, experts contend that Fidelity may well have learnt from its experience.
"With the China fund, the situation is slightly different. For a start, Bolton has only committed to managing the fund until April 2013. Secondly, Fidelity has an excellent Asian team in Hong Kong where he is based – so any handover, when it happens, should be smooth," says Yearsley.
Aberdeen Asia Pacific
Aberdeen Global Asia Pacific Equity Fund is yet another fund that could be exposed without its manager. With more than 20 years' experience, Hugh Young has established a standing as an Asia expert. Young lives in Singapore and his £2.4bn fund has seen a return of 121 per cent over the past five years.
While there is every indication that Young's departure would be disappointing for investors and Aberdeen is likely to see money leave, experts say that the fund should be able to weather the storm and investors will stick with it in the long term. "They have already appointed a younger member of their team to head up their emerging markets fund without any issues, and I am sure in time they will do the same on Asia," says Yearsley.
Xstrata boss Mick Davis, 52, has built Xstrata into one of the biggest natural resources groups in the world.
"He has been instrumental in the growth of the mining group following a stream of well-timed acquisitions," says Jonathan Jackson, the head of equities at stockbroker Killik & Co.
Davis's biggest deal, on which he has built his reputation, was pre-Xstrata, when he worked at rival mining group Billiton and had a hand in merging the company with Australia's BHP in 2001. He left to take control of Xstrata, which was then a small Swiss steel alloys business. Once there, Davis made a series of high-profile acquisitions and now heads a company valued at £44bn.
"If he was to leave, that would be disappointing for shareholders and at least in the short term there would be a wobble," says Jackson.
As co-founder and chief executive of software company Autonomy, Mike Lynch has seen his tiny start-up blossom into the largest technology firm in Britain. It's no surprise that his name and Autonomy are synonymous when you hear that the software is based on his widely respected doctoral thesis.
With Dr Lynch as the brains as well as the face behind the company, his departure would be a significant blow. And, in a relatively small company worth £3.5bn, losing your top man is all the more likely to cause problems.
"He is seen as the key driver in the group's growth to become market leader in the development of meaning-based computing software. As a smaller company, Autonomy could be much more vulnerable," says Jackson.
Sir Martin Sorrell
When Sir Martin Sorrell, 65, founded advertising and marketing company WPP in the 1980s, it started life as a £1m business making wire baskets. Today the group is worth £10bn and Sorrell has been instrumental to this success.
WPP has recently added Blue State Digital to its long list of acquisitions – the digital agency behind Barack Obama's 2008 online fundraising campaign – which should make WPP an even more formidable presence.
"Sorrell is a classic example, taking the business from nothing to the world's greatest advertising company. He has been with WPP through thick and thin and is undoubtedly the driving force behind the company," says Kuo.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Pension mortgages: 'The advice I was given was wrong and now I face losing my home'
You'll need £220,000 for a minimum wage in your retirement
Questions of Cash: I checked in with Air France in time and still missed the plane
Minister's pension promise to firefighters challenged
Bank-beating exchange rates on your international payments
- 1 Planes go hybrid-electric in important step to greener flight
- 2 North Korean prison officers 'cooked prisoner's baby and fed it to their dogs', more horrific accounts from UN report reveal
- 3 Antonio Martin shooting: Mayor says there should be 'no comparison' to Ferguson
- 4 Antonio Martin shooting: Police and protesters clash over teenager's death just five miles from Ferguson, Missouri
- 5 British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
iJobs Money & Business
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...
£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens