Fund management heavyweights Terry Smith and James Findlay have outlined their succession planning strategies in the latest sign that the investment industry is thinking more carefully about key person risk.
Mr Findlay, who runs £6bn at his boutique Findlay Park Partners, mainly through the soft-closed, £5.5bn American fund, said he had recently taken more significant steps towards securing the company’s future.
The firm hired Simon Pryke, former chief investment officer at Newton, at the start of this year as managing director.
Mr Pryke’s role is partly to ensure the company would be able to operate in the event of Mr Findlay’s departure, according to the founder.
“Simon is working hard looking at how you make sure [a well-equipped] team is in place. [Our position] is much better now than it was five years ago,” Mr Findlay said.
The manager was responding to the question “can the process outlast the star manager?” posed at an event held by Jupiter Asset Management.
The query came just a week after a PwC report suggested the industry’s focus on individual investors was beginning to fade.
The panel at the Jupiter event, however, was host to a number of managers who have often been designated as “stars”. Mr Findlay spoke alongside Mr Smith, Neil Woodford (pictured right), Odey Asset Management’s James Hanbury, and Jupiter Merlin multi-manager head John Chatfeild-Roberts.
Mr Smith and Mr Woodford, for example, have recently followed the example set by Mr Findlay in 1997 and set up boutique firms bearing their own names.
Their success has shown the attraction of a big name outperformer has, if anything, grown stronger. Mr Smith has raised £6bn since launch in 2010, while Mr Woodford has amassed more than £14bn in just two years.
Responding to the question on succession, Mr Smith said head of research Julian Robins would eventually succeed him as manager of the £5.7bn Fundsmith Equity fund and £190m Emerging Equities trust.
As is typical with boutique founders, the manager has invested his own money into the Fundsmith portfolios and is also the business’s majority shareholder. He said he had ensured his successor would not be required to buy out his estate.
“My money will be staying with the next manager,” Mr Smith added.
But Mr Smith also suggested open-ended fund structures, allowing investors easy access to their money should they want it, meant that the problem was less serious than some suspect.
Mr Woodford, for his part, said succession represented a “difficult challenge”. The manager has a trio of managers working with him at Woodford Investment Management – Paul Lamacraft, Saku Saha and Stephen Lamacraft – but investors’ sole focus inevitably remains on the man whose name is above the door.
“The biggest [issue] is maintaining culture,” he said at the Jupiter event.
Mr Chatfeild-Roberts, meanwhile, highlighted the growing size of the Merlin team. Founder member Peter Lawery retired in 2014, but assistant managers Amanda Sillars and David Lewis joined in 2011 and product specialist Alastair Irvine joined last year.
Broker Panmure Gordon issued a sell note on Jupiter earlier this year, saying the company as a whole remains too reliant on the Merlin team. But chief executive Martin Slendebroek disagreed, saying the growth of its fixed income business had helped ease this pressure.
“[Merlin’s] importance to Jupiter peaked in 2012 and has, in a relative sense, come down gradually ever since,” Mr Slendebroek told Investment Adviser.
An alternative solution, albeit not one around which a business could reliably be structured, might be to rely on managers’ addiction to the job.
As Mr Findlay put it: “I will probably be like one of these 80-year-old US managers who still turn up twice a week.”
