Research reveals impact of star fund managers

Research reveals impact of star fund managers

Analysis of 15 investment funds who had star fund managers leave at some stage between 2013 and 2017 has revealed that the level of out-performance dropped dramatically after their departure.

Online investment service providers Willis Owen’s research showed that with the fund managers at the helm, on average their funds’ annualised outperformance against relative benchmarks was 3.6 per cent.

However, when they left and new managers took over, this dropped to 0.4 per cent.



Star Manager Performance

Average annualised total return of funds during tenure of star fund managers

 

Average annualised total return of relevant benchmarks

 

Relative performance difference

 

15.2%

 

11.6%

 

3.6%

 

 

Post-Star Manager Performance

Average annualised total return of funds during tenure of new fund managers

 

Average annualised total return of relevant benchmarks

 

Relative performance difference

 

5.8%

 

5.4%

 

0.4%

 

 

Adrian Lowcock, head of personal investments at Willis Owen, said: “There is continual debate over the impact a manager can have on the performance of a fund.  However, there is little doubt that a small band of star fund managers can have a huge positive impact, and our research shows what happens when they leave.  However, in many cases the new managers who take over still out-perform their peers, but perhaps to a lesser extent.  The difference in relative outperformance cannot be accounted for by the performance of the underlying market alone.

“This doesn’t necessarily mean that investors should follow the manager. In many instances the manager retires, or the style happens to drop out of favour and the manager has a bad patch.  Each situation is unique so it is important to consider all the facts before deciding what the best course of action to take is.”

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