The ideal fund manager is a young, but proven one, according to investing veteran Peter Hargreaves, co-founder of LF Blue Whale Growth fund, as they are less likely to retire suddenly.
In a recent interview, Hargreaves said that investors should be aware of a fund management team’s age, noting that the Blue Whale fund had been set up with a “very young team”.
He said that a lot of well-known and established funds have managers that are close to retirement now. “So who are you going to get next?” he said. “I remember the furore when Anthony Bolton retired at Fidelity.”
At the time of Bolton’s announcement his Fidelity Special Situations fund was downgraded on numerous buy lists due to the uncertainty over who would take management of the fund.
“I’m a great believer in investing in young, but still proven, fund managers,” Hargreaves said. “Young people who are still hungry and are going to be around for many years to look after the money for you.”
Not everyone agreed that age was such a defining factor in a fund manager, however.
Nick Wood, head of fund research at Quilter Cheviot, said one of the key things to consider above age is how much the investment case for the fund is based on one manager versus the broader investment team. Ideally you would hold a fund because of what it can produce overall rather than the skills tied to one person.
But if age was considered Wood said it was more nuanced than just old versus young and when a manager retires.
He said this factor can depend on what region you are looking at. In the UK for example, managers generally retire about 60-65 whereas in the US there is more of a culture of working for as long as possible. “Warren Buffet being the most obvious example,” he said, as the 91-year old continues to act as chairman and CEO of Berkshire Hathaway.
Wood also said that retirement is not always a problematic thing for funds when a succession plan is in place.
“Often fund houses will embed a new manager alongside the incumbent well before the manager retires, but this isn’t always the case,” he said. Sometimes a new manager can actually be a good thing, refreshing the investment process, “which might actually be well overdue,” Wood said.
Katie Trowsdale, head of multi-manager strategies at abrdn, pointed out that an older manager can actually offer a level of security when handing over the reins.
She said when a manager is set to retire, investors are usually told several years in advance, giving plenty of time to plan for the future management. But this is not a luxury afforded when a younger manager ups and leaves for a somewhere else, which is much more disruptive.
Trowsdale said she typically preferred managers who had a long-term track record “that offer us years of valuable experience and evidence of how they navigated certain market environments.
“This may mean a manager is towards the latter end of their career and we consider this in the same way as we would assess how a younger manager is incentivized to stay at an organization,” she said.
Ben Conway, manager on the Hawksmoor multi-asset range – MI Hawksmoor Distribution, MI Hawksmoor Global Opportunities and MI Hawksmoor Vanbrugh – seconded Trowsdale’s view.
“I don’t think one can be prescriptive when it comes to a fund manager’s age – beyond the extremes,” he said, noting he would be “unlikely” to back a solo manager with zero experience.
The more important point is making sure there is an alignment between a manager’s motivation and incentives with the investors.
“There will be some negative correlation between hunger to succeed and age, but this should not be confused with causation, and it would be wrong to make a judgement based solely on age,” Conway said.