Aegon found that of 11 funds which have had high profile ‘star manager’ departures nine continued to beat their benchmarks. Investors should therefore ‘resist the urge to jump ship’ in such scenarios Aegon said.
The 11 funds used in the study were selected based on the reputation of the star manager, the fund size and there being a sufficient period of time passed since the manager departed.
The study found the average star manager’s successor has been in place for five years and delivered average annual outperformance against their benchmark of 1.66%.
Star breeds star
The ‘key drivers’ of continued outperformance following a star manager departure lie in fund management culture, Aegon claimed.
One factor is the remaining analysts at a fund management firm being ‘infused’ with the investment philosophy and process of their departed manager, while at many firms there is also a ‘robust culture’ of mentoring young talent which leads to the creation of future stars to replace those which have left, Aegon said.
Then there is the fact that firms are incentivised to replace a star manager with another highly regarded manager to meet ‘elevated investor expectation.’
The eleven funds examined in the study were Fidelity Special Situations, Schroder UK Alpha Plus, Liontrust UK Growth, Henderson EU Select Opportunities, Schroder European Opportunities, Jupiter European Special Situations, Axa Framlington UK Smaller Companies, Schroder Tokyo, Schroder Income, Jupiter Financial Opportunities and Fidelity European.
“Funds which consistently outperform their benchmark are few and far between, and those managers who develop a proven track record of success deserve their strong personal reputations,” said Aegon investment director Nick Dixon.
“However our analysis should be a wakeup call for investors. So called star managers frequently rely on the ideas and technical analyses of their wider team, who will have been mentored and developed by the star to continue their legacy and investment process after their departure,” he added.