Adviser Rant: It’s outflows that affect performance

Abraham Okusanya

The past few weeks have seen a number of star fund managers either switching fund groups, such as Standard Life Investments’ Euan Munro or, in the case of Fidelity’s Sanjeev Shah, stepping back from fund management.

As someone who provides research to many advisers running portfolios in-house, I’m always intrigued to see how advisers respond to the departure of fund managers. Should the firm follow the manager or stick with existing funds?

One thing appears clear: the departure of a star fund manager is more likely than not to hurt the fund’s performance, especially in the following year.

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So how much of a difference does an individual fund manager makes? Don’t most fund groups tell us that they have robust processes in place; they operate a team approach and that they have teams of analysts supporting the fund management teams?

If all this is true, the departure of a single manager, in itself, should make very little difference to performance?

My contention is that all the hoo-hahs when a manager leaves are unhealthy and does more harm than good. To my mind, it is the fund outflows that follow the media frenzy when a manager leaves that hurt performance, more than the difference that a single manager makes.

Abraham Okusanya is is principal at FinalytiQ