01 Feb 2024

Financial Services Pulse | Money Matters

Are star fund managers a dying breed? Get our take in the latest Money Matters Newsletter.

Dan Pike

Welcome to Money Matters, part of The MHP Financial Services Pulse. Our team of experts bring you their take on all things money and the communications considerations that the hottest trending topics in the space are creating. 

Are star fund managers a dying breed? 

Recent press coverage would point to the demise of the star fund manager.

Consistent redemptions seen by Terry Smith and Nick Train over the past year have been in focus, while the recently announced departure of Ben Whitmore from Jupiter sent the firm’s share price into a spiral. Meanwhile, Bobby Jain’s attempts to have the largest ever hedge fund debut seems set to fail, with expectations now being managed down. Looking further back in time, the retirement of James Anderson dominated the business pages. The less said of the fall of Neil Woodford, the better.

At the same time, we are seeing the rise and rise of passive investing. In the US, the amount of money in passive funds has for the first time outstripped that in actively managed counterparts – an eye-watering $13.3trn. How much of this is the pull to passive vehicles or more generous interest rates – and how much of this is a push from seemingly underperforming actively managed funds remains to be seen.

But the underlying debate between stockpicking versus following the market is not new. Nor indeed is the question around the value of the superstar stockpickers and their pulling power. The same questions could have been asked 10 years ago. And they were. For instance, the Financial Times questioned in March 2014 whether star fund managers are a dying breed. Since we still have well-known, highly respected names in the industry that seem to shine brighter than others and inspire client loyalty whatever the investment weather, the answer remains no.

That’s not to say nothing has changed, especially since the Woodford debacle. Larger fund houses are clearly more alive to the downsides of star managers – whether the key man risk, the perception of a lack of appropriate controls, or client concerns around long-term succession planning. That’s why they are far more disposed to communicating the infrastructure, processes and technologies that sit behind their portfolio managers and the collegiate teams that drive performance. Process over individual personality has become more common, through necessity; performance doesn’t just rest on one individual’s shoulders.

Investment personalities in The Networked Age

But of course that’s just part of the story. Star fund managers are a distribution team’s dream: they generate their own brand awareness, media interest, and ultimately inflows. As such, they will by necessity remain a core part of fund management’s marketing machine.

And in The Networked Age – the volatile, activist and polarised landscape we communicate in – there is a simple lesson that continues to help star managers cut through: the messenger is as important as the message. Essentially people connect with people they identify with or are inspired by.

We believe passions spread ideas. And through big personalities passionately demonstrating their conviction in their investment approach, they become highly effective – and often highly trusted – messengers.

Despite the advent of AI, and the rise of passives, investment involves humans, and therefore cannot be emotionless. This means there will always be a role for mavericks that we place our trust in – hoping we have found the next genius that can beat the market.

Diversify your spokesperson portfolio

Star managers deliver investment companies huge media profile. But the key lesson for communications teams is this: do not place all of your eggs in one basket. Managers do not stay in situ for ever. This means thinking beyond pure succession planning for a single manager; it means demonstrating the expertise and range of personalities across your portfolio managers. It is far better to build a small team of Galacticos than rely on one star player.

You can read all of our Financial Services Pulse content here. For more information about the Financial Services team or to discuss this topic further, contact Dan directly at [email protected].

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