News analysis: The rise of manager succession planning

This year so far has seen a number of high-profile manager resignations and departures, and the differing investor reaction to each one highlights the growing need in the fund management industry to have a form of succession planning in place for key managers.

Last week saw Graham French (pictured right), manager of the £4.3bn M&G Global Basics fund, announce that he will hand his fund over with immediate effect to Randeep Somel, but will remain at the group in an advisory role for six months before retiring in May next year.

M&G has planned extensively for manager succession, with Mr Somel having been a deputy manager on the fund since 2010, and he and Mr French will be working hard to keep clients happy during the next six months.

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The same was not true during Richard Buxton’s shock departure from Schroders, when the lack of a successor in place was undoubtedly a contributing factor in his UK Alpha Plus fund more than halving in size as investors scrambled to the exit.

In contrast, Euan Munro’s departure from the hot-selling Standard Life Global Absolute Return Strategies (Gars) franchise had much less impact due to the team nature of the management and the ready replacement of Guy Stern.

Invesco Perpetual had been lining up Mark Barnett as the successor to Neil Woodford, and the clear succession plan may be one reason why outflows from Mr Woodford’s funds are at the lower end of Invesco’s expectations, it claims.

It is no surprise, then, to see in recent months a number of fund groups line up young deputy managers or co-managers on key funds, in an attempt to keep outflows from the funds to a minimum in the event that the star manager leaves.

In August, Axa Framlington announced a raft of deputy manager appointments across its UK equity funds, but the most interesting one was Chris St John taking on the role of deputy manager behind Nigel Thomas on the Axa Framlington UK Select Opportunities fund.

Mr St John is currently cutting his teeth on the Axa Framlington UK Mid Cap fund, with extraordinary performance so far but, while he is reportedly happy just to be running that fund right now, there is no doubt in the industry that he is being groomed to replace Mr Thomas, who will obviously want to bring his long and distinguished career to a close at some point.

While Axa has taken the step of succession planning by making the potential replacement a deputy manager, First State Investments has gone one step further in recently naming Tom Prew as co-manager with Jonathan Asante on its Global Emerging Market Leaders fund.

First State managing director Stuart Paul acknowledged the firm had always considered succession planning, which is why it has installed Mr Prew as co-manager alongside Mr Asante and Alistair Thompson – who has long been viewed as the successor to Angus Tulloch – on that manager’s Asia Pacific funds.