Equities  

Heir to the throne

Succession planning can take one of two routes: promote from within, or recruit a manager from another firm.

Companies which use co-managers to run funds can make their succession planning pretty obvious, especially when a younger manager is co-managing with an older, more experienced person.

Other houses prefer not to have a named manager on a fund and instead have a team of people running the assets. This should, in theory, mean that succession planning for them is not an issue as they are unlikely to lose an entire team at once (although even this is not unheard of).

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But when a ‘star’ fund manager is involved – whether he is the sole manager, co-manager or part of a bigger team – succession planning becomes more difficult. The bigger the star, the more assets they have, and the bigger the business risk.

Sometimes a change of manager can come as a shock to a company; for instance, when Richard Buxton left Schroders. While I am sure Schroders would have liked to have kept his resignation to itself for a little longer, the inevitable leak occurred and it was well and truly on the back foot.

As Mr Buxton’s deputy, Errol Francis, had moved with him, promoting from within was not as straightforward as it might have been. It had a bit of luck on their side though.

First it had enough kudos as a company that it was able to attract not just one, but two managers from other companies within a month. Philip Matthews was poached from Jupiter and Alex Breese from Neptune. Neither quite have the same gravitas as Mr Buxton, but both are respected and have good track records.

Fortune

Their second piece of good fortune was that Schroders was about to announce a deal which would see it buy Cazenove Capital. With this deal came the very highly rated Julie Dean, who would go on to run the Schroder UK Growth Investment Trust.

You have to admire how quickly and decisively Schroders moved in this situation, but it did not stop it haemorrhaging around £1.5bn of assets from the UK Alpha Plus fund, as many investors followed Mr Buxton to Old Mutual.

Known departures are generally easier to deal with, as the company has the time to prepare both themselves, and hopefully investors, for the changes about to occur. But being easier does not necessarily mean they will be any more successful.

Turning to Fidelity; its succession planning has, for years, been to promote home-grown talent. It has done this reasonably successfully, even though most are quite young and relatively unknown.

However, when you think of succession planning at Fidelity, Anthony Bolton always comes to mind.

His first successor was Tim McCarron in 2003, when he took on the management of Fidelity European. Mr McCarron went on to run the fund for six years, most of which were successful.