By GRAHAM FROST 10/03/2008
A good reason for using a company like Bestinvest is that our extensive research team can keep track of manager changes, which investors simply do not have the time to do themselves. It’s important because a manager change can often be a precursor to a change in the performance of a fund. You don’t want to get stuck with a new manager with a lousy track record, or even no track record at all and you may wish to follow the manager to his new position.
There seems to be a lot of managers on the move recently. To the end of the first week in March, we have recorded 26 manager moves, four of which were rated by us. That sounds a lot but our records indicate that the there tends to be a seasonal effect because people wait for bonuses to be paid before resigning. In the first quarter of last year 63 managers moved, in 2006 38 moved, in 2005 28 moved, and 31 in 2004. Of the total moves in each complete year these represented 33%, 28%, 23%, and 32% respectively.
Obviously, if a manager has been successful in managing a particular fund, then other asset management companies can be expected to come calling. If a manager has been performing poorly, he may be expected to come under scrutiny by his management who may move him off the fund. Then again, the cause of a move may simply be that expected bonuses did not materialise, so why not line up a better payer with some guaranteed bonuses? Or managers may simply get fed up working with same people after a time. Whatever the reason, the first quarter of the year seems to be a time to seek greener pastures. However, we do not expect the peaks of manager moves of 192 in 2007 to be revisited soon. Asset management companies are bracing themselves for a tough year as the fallout of the credit crisis lingers. They are less likely to poach people at high prices and managers, uncertain of their own job prospects, are less likely to move.
As usual, we will be keeping a close eye on fund managers, adjusting ratings when required and removing them when necessary so clients can take appropriate action.