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Opportunities for new ideas and fresh approaches as star managers lose favour
A new report by fund data provider FE has revealed that the continued prevalence of the star fund manager culture has been called into question.
Entitled ‘The Evolution and Experimentation: The Financial Advice Market in 2016’, the report indicates that the disadvantage of the star manager culture is now based around two main issues.
The first factor is the well-known risk faced by asset-management firms which rely upon a small selection of these so-called ‘star managers’ to attract clients and inflows. However, should these individuals leave the company, firms can stand to lose large amounts of their AUM. Persuading these managers to remain can involve salary increases and expensive bonus packages.
According to FE’s research, the second element of doubt centres around the fact that advisers are not ‘not awestruck by big reputations’ and are no longer hesitating to abandon star managers or major fund houses if they are no longer meeting their client’s needs.
Instead, financial advisers are ‘on the lookout for fresh ideas and approaches’ which returns niche managers to the scene.
‘These results will be especially interesting to the asset management industry at a time when we are seeing a rising trend from firms to move towards a more team-based investment approach’, said FE research manager Charles Younes. ‘Star managers, although high performers as the name suggests, are expensive and pose problems when they leave – succession planning, outflows to name a few.
‘In fact, asset management firms see a star manager as one of the biggest individual threats to their business and at a time when there are already many potential issues in the horizon – it makes sense to take a team-based approach and mitigate possible future problems’ added Younes.
