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.
- 1 Games of Thrones actor Lena Headey makes emotional promise to her unborn daughter
- 2 Isis burns woman alive for refusing to engage in 'extreme' sex act, UN says
- 3 Puerto Rico, island of lost dreams: People are leaving the debt-hit territory in droves as near neighbour Cuba's star rises
- 4 Female Muay Thai champion hustles coaches to give them a beating
- 5 Picture of couple posing with beached dolphin 'that later died' causes outrage
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
Report finds that Britain's wages are the most unequal in Europe
The day that Britain resigned as a global power
Almost a third of school pupils believe 'Muslims are taking over our country', study claims
SNP fury as HS2 finds 'no business case' for taking fast train service to Scotland
iJobs Money & Business
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...
£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...
£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...
Day In a Page
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof