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EDITIONS
Monday, 5 August, 2002, 13:27 GMT 14:27 UK
Investors 'fear' fund manager exodus
Nigel Thomas and George Lucraft are two high profile departures
Nigel Thomas and George Lucraft two of the most high profile departures
They can be paid more than top Premiership footballers, and are often lionised by private investors, yet more fund managers than ever are leaving their funds.

Many are leaving their jobs at a seemingly breakneck speed either to join rivals, set up their own funds or leave the industry altogether, having cashed in share options.

Fund managers are responsible for the running of the UK's unit and investment trusts. On a day-to-day basis they issue orders to buy and sell shares.

Longer term they decide the approach of the fund to particular sectors and the market in general and if they get it right, they can attract investors to their fund in droves.


The high turnover of managers can make a nonsense out of past performance figures.

Jason Hollands

Although they do not act alone - many funds have teams of researchers and analysts in place - the buck stops with the lead fund manager, what they say goes, with investors reaping the rewards.

As a result, spotting a high performing manager is a favourite private investor past-time. Even more so during a bear market when investors are furiously looking for any edge that they can get.

Merry-go-round

However, many fund managers are now on the move.

In fact, according to the latest edition of the UK Fund Industry Review and Directory, just over half of the UK's 2,039 fund managers have been in their posts for less than two years with 639 having been in situ for less than one year.

"The manager merry go-round is operating at a great pace. Many are leaving established management groups to set up a hedge fund where they have greater freedom of action and hence the potential for higher bonuses," said Jason Hollands, deputy managing director at BestInvest.

Some, though it seems are paying the price for past mistakes, either being turfed-out during a takeover or shown the door for underperformance.

Falling star

When a high-flying fund manager chooses to leave a fund it can have a devastating effect.

Earlier this year ABN AMRO Asset Management was rocked when two of its star managers, Nigel Thomas and George Lucraft, left to join rival Framlington Group.

The funds formerly managed by Mr Thomas and Mr Lucraft haemorrhaged money as investors followed the big names out. Eventually, ABN AMRO merged with Artemis Unit Trust Managers hoping to stop the exodus.

However, it's not only City institutions that are affected by a fund manager leaving, private investors, having chosen a fund partly because of the performance brought by a particular fund manager, can find themselves holding the investment baby.

"The high turnover of managers can make a nonsense out of past performance figures. Investors could be basing decisions to buy on the performance of the last management team," said Mr Hollands.

New managers?

In addition, warns Mr Hollands, funds can alter utterly when a new manager takes over.

"As a result, it is vital that investors and financial advisers keep an eye-out for a change in manager, reassessing the investment and studying the form closely of the manager coming in."

What's more, if buying into a fund on the back of a particular manager, Mr Hollands believes investors should check how long the manager is likely to stay.

"Good clues that a manager will stay are that they own a substantial stake in their own fund or that they have a long time before they can exercise any share option rights."

That way, Mr Hollands believes private investors could avoid buying into a fund only to find that the star manager leaving for a rival or to enjoy the fruits of a share option.

See also:

28 Jul 02 | Business
26 Jul 02 | Business
11 Jul 02 | The markets
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