Succession planning is nothing new, though. M&G has long had deputy managers across its key funds, while Adrian Gosden, who has long been considered Adrian Frost’s successor at Artemis, has been co-managing the Artemis Income fund for more than a decade.
But Adrian Lowcock, senior investment manager at Hargreaves Lansdown, said the problem of key man risk had grown in recent years due to the increased concentration of assets in top-performing funds, which has made succession planning even more important than before.
Gill Hutchison, head of investment research at City Financial and former head of investment consultancy at OBSR, agreed the need for groups to discuss succession planning was paramount.
Ms Hutchison has just launched Adviser Centre with former OBSR director Peter Toogood at City Financial, a web-based service that will include a ‘Positive Watch’ list, which will, among other things, comment on younger investment talent.
“There are a few examples where we want to work with fund managers to find out who these people are,” she said.
“We will aim to look at the successors, highlight the funds they are running now and have views on them. Succession planning is becoming a burgeoning problem.”
Paul Surguy, head of managed funds at Sanlam Private Investments, said having a named manager in place behind the key managers was “good business practice”.
But he said he was more concerned with how much time the overall team had spent together and preferred funds that had more of a team approach rather than one key manager.
He cited Gars as an example of a strategy that had lost several managers in recent years but that had not impacted on the fund due to its team approach.
He said First State had handled its succession process very well by introducing new members of the team over a very long time period. “You cannot just put a deputy manager in place six months before the manager leaves, they need to have been part of the team for some time,” he said.
Fund managers are becoming more and more aware of this problem, as none of the retail open-ended funds with assets of more than £4bn are run by only one manager without a deputy.
While having a succession plan in place could benefit fund management firms by stemming potential outflows from their funds, it can also benefit investors in the funds by ensuring that the replacement for the outgoing manager is ready straight away to assume control of a fund’s assets, which could prevent too much slipping of performance or radical changes of style.
As the saga around Mr Barnett and Mr Woodford highlights, though, it does not matter how long a firm has been planning succession, key managers have built up their asset base for a reason and, when they leave so will investors.
