Among the many things that investors may consider when they are choosing a fund to invest in is who the manager is. Track record, an ability to outperform over an entire market cycle and experience in the asset class or region in which they are investing are all desirable qualities in a manager. But does the length of their tenure have any effect on the performance of a fund?
Ben Willis, head of portfolio management at Chase de Vere, says: “Fund management is a Darwinian environment and long-term managers are generally survivors because they have established successful track records.”
Alex Savvides has managed the JOHCM UK Dynamic fund for a decade. It is a top quartile performer over one, three and five years and has delivered a return of 78.8% over five years against a sector average of 60%.
The fund has a Silver Morningstar Analyst rating, with the manager’s lengthy tenure earning it a positive rating under the people pillar criteria. Morningstar analyst Samuel Meakin says: “Savvides has delivered his investment approach with consistency and conviction since he launched the fund.”
Alexander Darwall has managed Jupiter European since January 2001 and, similarly, is a top quartile performer over the same three time periods. The fund has returned 114.8% over the past five years, while the average Europe Ex UK fund has returned 71.2% over the same period. Meakin says the Gold Rated fund is “managed by an experienced and talented manager”.
He adds: “The stability and consistency of management and investment approach are undoubtedly contributing factors to the fund’s success.”
Meanwhile, Adrian Frost has managed the Artemis Income fund since he joined the firm in January 2002. It is a top-quartile performer over one and three years and in the second-quartile over five years with a return of 61.2% over that time, compared to a sector average of 55.5%.
Willis adds: “There is some merit to investing with fund managers who have a longer tenure. It’s difficult to put a price on experience and we do believe that investors are in safer hands if they’re using successful fund managers who have been investing across several market cycles.”
Investment Trusts Offer Longevity
Investment trusts are even more prone to longevity at the top. According to data from the Association of Investment Companies, half of its members have had the same manager for ten years or more, while 23% have had the same manager for two decades or longer.
The longest serving investment trust manager is Peter Spiller, who has been at the helm of Capital Gearing Trust (CGT) for an impressive 36 years, having started working on the trust on New Year’s Day 1982. Yet performance has been shaky of late, with the trust in the third quartile of its peer group over one and three years. Over five years it is in the bottom quartile with a return of just 18% against a sector average of 40.7%.
Meanwhile, Simon Knott has managed Rights & Issues Trust (RIII) for 34 years. Over five years it has returned more than double the sector average at 267% and 114% respectively, putting it firmly in the top quartile of UK Smaller Companies trusts.
These funds and trusts are clearly just a snapshot of those available to investors, but the varied performance certainly seems to suggest that process and investment style may be more important than manager tenure.
As a comparison, Neptune US Opportunities has had three different fund managers in the past two years – quite an unusual occurrence in the industry. Yet the fund is in the top quartile of its peer group in the year since current incumbent Alastair Unwin took over, with a return of 18% over that period compared to a sector average of 10.1%.
Beware a Change in Market Conditions
But Willis suggests the fact that the stock market has been in bull market territory for almost a decade may have skewed the figures, as it has been easier for managers to produce decent returns in the environment. It could be that certain managers start to shine once more as volatility picks up and the market becomes a more difficult place to invest.
He adds: “As we move into a potentially new phase of financial markets, it could be that an old and experienced head is what investors need.”
Tom Becket, chief investment officer at Psigma Investment Management, disagrees: “It is easier to analyse a fund if the manager has been in place for longer as you can see when he typically underperforms and outperforms.
“But it’s important to be open-minded and understand what the investment process and portfolio holdings mean for the future rather than just getting hung up on the past.”
