A stubborn, ‘do-it-all’ approach to fund management can lead to outflows when the time comes for a manager to retire, warn several fund selection professionals, who say a team-based approach is becoming more important for long-term product success.
This comes following a spate of fund manager retirements year to date. Just the other month (October), Abrdn’s Hugh Young, and Liontrust’s James de Uphaugh and Chris Field announced they would be taking a step back from running money. Other names to hang up their boots this year include Janus Henderson’s John Bennett, Murray International’s Bruce Stout, Fidelity’s Eugene Philalithis and Jeremy Podger, and Jupiter’s Richard Buxton.
Of course, retiring fund managers – or managers departing – is not a new trend. Data from Morningstar shows that the average tenure of a manager on an IA fund is 8.3 years, with each portfolio experiencing an average of more than three manager changes over their lifetime.
However, several fund selectors believe there are factors accounting for an unusually high number of retirements so far this year.
Meera Hearnden, investment director at Parmenion, says managers may be taking slightly earlier retirements due to “some fairly unusual times in markets in recent years”.
“The past 15 years have been dominated by major events such as the global financial crisis, regulation changes, Covid, inflation, extreme monetary policies and change in governments,” she reasons. “It is not surprising if fatigue is setting in with some older managers, leading to earlier retirement.”
Kamal Warraich, head of equity fund research at Canaccord Genuity Wealth Management, says regime changes historically lead to higher bouts of retirements. “We saw a number of value managers retire post Covid, when the style had essentially been written off by the investment community. Conversely, a similar thing has happened in the growth sphere during 2022,” he points out.
“Alongside this exodus, you also had a number of managers reach 30, 35 and 40 years’ tenure in the industry – it was simply the right time to go.”
Even reaching tenure milestones seems to have fallen in-step with more managers retiring about now, says Kelly Prior, investment manager at Columbia Threadneedle Investments.
She tells Portfolio Adviser that, after starting in the industry in the mid-1990s, the following decades seemed to be “a golden age of fund launches and product innovation”.
“Managers looked to stretch their creative wings, flying from the larger investment houses to smaller boutiques, which would allow them to run mandates they designed.
“These managers are now 30 years into their tenure, the last 15 of which have been really testing.”
Robert Fullerton, senior research analyst at Hawksmoor, surmises that “perhaps the last big heyday of financial services was the 1980s” when, if a graduate was at the top of their class at a prestigious university, they would have “probably wanted to join an investment bank”.
“If you joined the industry [in the 1980s] and managed to last, you will be somewhere around retirement age now,” he adds.
To read the rest of this article, please take a look at the November edition of Portfolio Adviser Magazine