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We consider the risks of using a fund manager whose services are needed in many different places  
Thursday 19 Jul 2018 Author: David Stevenson

Anyone paying for the services of a fund manager should expect to have access to sensible decision making and hopefully wealth creation. Investors are placing their trust in two key areas: the asset management business overseeing the investment fund and the fund manager themselves to make the correction decisions.

While a lot of consideration is often given to the credentials of these parties, less is given to whether the fund manager’s expertise is being spread too thinly. Numerous managers are responsible for more than one investment fund, meaning they risk becoming distracted by trying to do too much at once.

This can certainly be the case if the fund manager is working on products that have a different strategy such as overseeing an income fund and a specialist fund such as a small cap focus or one that invests in private, early-stage entities. The latter can require the fund manager to spend a considerable amount of time meeting and understanding business developments.

One industry insider who wished to remain anonymous thinks some of the more famous fund managers may have been given extra mandates to increase inflows into products. Many investors are happy to back a well-known manager in more than one situation, thus the asset manager effectively has an opportunity to trade on a fund manager’s fame.

Some fund managers run a staggering amount of funds; at the top of the list is Santander Asset Management’s Toby Vaughan who runs 27 products. These range from UK and US equity funds to sterling bond funds. Data provider FE Trustnet says out of the last seven years Vaughan has outperformed his peer group in three years, underperformed in three years and matched the performance
in one year.

Bambos Hambi has overseen 25 funds at Standard Life since 2011. FE Trustnet says he has underperformed the peer group in six out of the past seven years. A lot of his mandates are multi-manager products or fund of funds, so you could argue the day-to-day decisions of making individual investments are being made by someone else.

Being responsible for multiple mandates doesn’t always equal mixed or bad performance. For example, bond specialist Ian Fishwick at Fidelity is responsible for 16 funds as lead or co-manager and FE Trustnet says he has outperformed the peer group in nine out of the last 10 years.

In the investment trust space, the Association of Investment Companies calculates there are 46 fund managers looking after two or more investment trusts, and 12 that manage three or more.

Simon Molica, a fund manager at AJ Bell Investments, makes the point that perhaps it’s not the number of mandates that can impact a manager’s effectiveness but rather the size of the mandates. He adds that even if a manager seems to be running numerous funds, they should be well supported by colleagues, especially true of the larger asset houses.

Indeed, fund managers often operate as a part of a team and while there is someone’s name attached to the product as lead manager, in reality there are lots of people doing the work. For example, this team approach is seen at asset manager Baillie Gifford. (DS)

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