Don’t Follow A Fallen Star Fund Manager

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Just because a star fund manager leaves, investors should not follow suit and jump ship, according to industry experts.

Eleven funds which were left without a leading fund manager at the helm had their returns analysed by financial firm Aegon, which found investments continued to beat benchmark returns despite the departure.

As a result, the firm is warning investors to consider sticking with their fund rather than switching their cash.

In each case, the star manager had run a fund for at least five years before leaving.

In nine of the 11 funds, return on investment continued to outperform benchmark yields.

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The study revealed investment returns were not disrupted because the investment team at the fund carried on with the same strategy and firms tended to replace their star players with top talent and mentored younger analysts.

“Not many funds outperform benchmarks,” said the firm’s investment director Nick Dixon.

“That leads to managers who consistently perform well developing good reputations. Often their way of working and methods infuse the team at the fund, leaving a legacy that lasts for years after they have left.

“Moving money can trigger fees and the risk the new fund will not hit the same performance levels, so can be costly. For many investors, staying put is the better option, at least until they can see how things will pan out.”

Asia focus is changing

Meanwhile, a study by BlackRock’s Asian investment specialist Andrew Swan suggests investors can rely on more wealth growth in the region.

He argues that lower rates of gross domestic product and a shift from production to consumption are not necessarily harmful to investments.

Although many analysts suggest the change is weakening growth, Swan explains a power shift to new governments with new ideas on how to tackle their economic problems is triggering improved returns.

“These governments have new ideas that are encouraging companies to move into new areas,” he said.

“The private sector is taking over from the old, stagnant public companies and this hints at the possibility of efficiencies and a new era of growth. I think it’s an exciting time to look at investing in Asia.”

He points out this renewed focus is opening opportunities for entrepreneurs across the region, from India to China and is likely to spark more healthy returns for investors prepared to stick with the region rather than move their money.

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