A fund may well have a strong track record, but if it loses the man or woman that led it to the top of the performance tables, what’s to say a new manager can repeat the trick?
Hargreaves Lansdown’s Mark Dampier recently highlighted this risk, saying that manager track record is far more important than fund track record.
However, there are a number of cases where funds have been unaffected by a star manager's exit. In some cases they have even prospered as a result.
Rowan Dartington’s Tim Cockerill recently pointed out that many funds are more reliant on in-house teams and research capabilities than individuals, limiting the impact of an exit.
He also pointed out that following a star manager does not always work out for investors, arguing that they are often better off staying where they are.
With this in mind, FE Trustnet highlights five funds that have shrugged off a star manager's departure:
ABN Amro Equity Income/Artemis Income – George Luckraft
"This one is a real trip down memory lane," said Richard Troue, fund analyst at Hargreaves Lansdown. "The ABN Amro Equity Income fund was doing very nicely under George Luckcraft until he left quite suddenly [in 2002]."
"Adrian Frost then took it over, and he’s become one of the highest profile equity income managers around, while Luckcraft has had quite a rough time managing equity income funds [at AXA Framlington]."
Artemis Income and ABN Amro Equity Income merged in 2002, keeping the former’s name. Since then, it has become one of the largest and best-performing funds in the IMA UK Equity Income sector.
Performance of funds vs sector and index over 10yrs
Source: FE Analytics
Over the last 10 years, the £5.1bn Artemis fund has flourished under Frost, achieving top-decile returns of 190.98 per cent.
Luckcraft’s AXA Framlington portfolio had a great period during the early and mid-2000s, but has since struggled. It has underperformed both its sector and benchmark over the last decade.
Artemis Income requires a minimum investment of £1,000 and has an OCF of 1.55 per cent.
AXA Framlington Equity Income requires a minimum investment of £1,000 and has an OCF of 1.61 per cent.
Jupiter Income – William Littlewood
William Littlewood ran the Jupiter Income fund prior to Anthony Nutt’s appointment in May 2000, leading it to very strong performance in its IMA UK Equity Income sector.
In the decade prior to his departure from the firm, the fund delivered 466.89 per cent, beating its sector average and benchmark by more than 200 percentage points.
Nutt had some very big shoes to fill, but exceeded expectations, leading the fund to the top quartile of the sector over three, five and 10 years.
Performance of fund vs sector and index May 2000 to May 2010
Source: FE Analytics
The last three years before Nutt’s own departure were far less successful, but he was one of the best-performing and highest-profile equity income managers for more than a decade after succeeding Littlewood.
"[Littlewood] had great success running the Jupiter Income fund, but he left Jupiter and Tony Nutt (pictured) took over," explained Cockerill. "Nutt had a tough time towards the end, but he didn’t put a foot wrong for a long time."
Jupiter Income is now being run by Ben Whitmore, who also heads up the Jupiter UK Special Sits portfolio.
Since arriving in January this year, he has returned just over 10 per cent, putting the fund marginally ahead of its sector and benchmark.
The £2bn fund requires a minimum investment of £500 and has an ongoing charges fee (OCF) of 1.7 per cent.
Jupiter European Special Situations – Leon Howard Spink
The four crown-rated Jupiter European Special Situations fund is headed up by Cedric de Fonclare. He recently lost his FE Alpha Manager rating, but this is no reflection on the performance of this £697m vehicle.
The fund lost lead manager – and current FE Alpha Manager – Leon Howard-Spink to Schroders in July 2005, who had led it to very strong performance since his appointment in April 2001.
However de Fonclare, who at the time was a deputy manager, has performed well since then, leading the fund to the top quartile of its IMA Europe ex UK sector over five years, with returns of 26.98 per cent.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
Howard-Spink’s Schroder European Alpha Plus fund has returned marginally less over the period, with more volatility.
Troue said: "To be fair, both have done very well since Howard-Spink left, but Cedric has definitely proved any doubters wrong."
Jupiter European Special Situations requires a minimum investment of £1,000 and has a TER of 1.8 per cent.
Newton Higher Income – Toby Thompson
"This fund was run very successfully by Toby Thompson for many years, but he left for New Star in 2001," Cockerill said.
"It was taken over by Clive Beagles and performance actually improved under him."
"Beagles then went to JOHCM UK Equity Income a few years later, which has been a top-performing fund. However, this is another instance when investors would have been better off sticking with the fund."
Newton Higher Income returned 6.87 per cent under Beagles, who was lead manager between July 2001 and March 2004. Over the same period, both the IMA UK Equity Income sector and FTSE All Share lost money.
Cockerill added: "[Thompson] went to New Star and it never really worked for him, but Newton maintained that it was very much a team-driven fund and it carried on doing well."
Newton Higher Income was taken over by Tineke Frikkee when Beagles left for JO Hambro. She was replaced by Richard Wilmot in December last year, following a period of poor performance, which included a dividend cut.
Newton High Income requires a minimum investment of £1,000 and has an OCF of 1.61 per cent.
Fidelity Special Situations – Anthony Bolton
This one, Troue says, is a little more touch-and-go, because Sanjeev Shah has only been lead manager since the beginning of 2008; however, he believes the manager has emerged from Anthony Bolton’s shadow very successfully.
Performance of fund vs sector and index over 10yrs
| Name | 1yr (%) | 3yr (%) | 5yr (%) | 10yr (%) |
|---|---|---|---|---|
| Fidelity - Special Situations | 27.12 | 21.67 | 39.45 | 240.61 |
| IMA UK All Companies | 16.31 | 24.95 | 28.13 | 140.71 |
| FTSE All Share | 14.01 | 23.72 | 29.43 | 148.81 |
Source: FE Analytics
Since taking over from the legendary investor in January 2008, he has led the fund to the top quartile of its UK All Companies sector, with returns of 33.91 per cent.
Shah was initially criticised for significantly underperforming his peer group and benchmark in 2010 and 2011, but has since recovered, with particularly strong returns over a one-year period. He has still slightly underperformed his sector and benchmark over three years, but is well ahead over five.
"He had a rough patch after Bolton (pictured) left, but has done very well overall," he said. "I think investors were right to stick with him and the fund, and I’d recommend them to keep doing so."
"He did have a period where he underperformed, but people seem to forget that so did Bolton at certain times during his career. It’s easy to look at 25 years of cumulative outperformance, but during that time he had periods of underperformance of up to four years."
Bolton and Shah pride themselves on being contrarian investors, targeting out-of-favour stocks that they believe have been overlooked by the market.
Under Bolton, Fidelity Special Sits was one of the most successful funds in the UK market, returning more than 12,000 per cent to investors between 1979 and 2008.
The fund requires a minimum investment of £1,000 and has an OCF of 1.7 per cent.