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 Given a firm's value is based on taking a cut of the assets it
holds, while investors only leave their cash with a manager on the
basis of performance, asset managers have long sought to keep top
performers sweet.
Yet competition to retain top talent is picking up, throwing the
skills of top performers into even starker relief and leading some
firms to strike profit-protecting deals.
In a year marked by the high-profile exit of Neil Woodford and more
than $12 billion from two of his Invesco Perpetual funds, the
biggest outflows from a fund caused by a manager leaving in British
fund history, three others, Waverton, Charles Stanley and Henderson,
took a different tack by letting some assets leave while retaining
some financial benefit.
The more collegiate approach is "quite an interesting new trend,
where a star manager is able to take their fund with them, (which)
counteracts the need for the first company to deal with the outflows
that might arise," Jeremy Beckwith, director of manager research at
Morningstar UK, said.
Beckwith said he knew of no previous examples of such deals.
Investors also flooded to the exit at Schroders when Julie Dean left
and, to a lesser extent, when Simon Brazier quit what is now
Columbia Threadneedle Investments in September to join Investec
Asset Management.
Together with Invesco, he three firms collectively saw outflows of
more than $15 billion since the news of the departures became
public, estimates from Lipper showed, though not all would be due to
top figures leaving.
TRACK RECORD
Similar deals have also surfaced in the hedge funds industry.
BlueCrest recently let top trader Leda Braga leave with $9 billion
in assets to set up a firm called Systematica, while David Warren,
founder of DW Partners, took control of more than $5 billion he
previously managed for Brevan Howard. BlueCrest and Brevan Howard
both retained a stake.
For the fund firm the decision to let a manager leave with the
assets means earning some fees on all the assets, rather than
grabbing all the fees in a smaller fund.
The manager, on the other hand, is saved the effort of raising funds
from scratch, while maintaining a performance track record which can
be key for future flows.
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As well as retaining some financial benefit in the fund's assets,
the deals avoid a forced sale of a chunk of the fund to pay exiting
investors.
In Waverton's case, Oliver Kelton left in February to join hedge
fund Odey Asset Management, but continued to manage the Waverton
European Fund.
At Henderson, Richard Pease left in October and, as per an existing
agreement, took the European Special Situations Fund to his new
firm, Crux Asset Management, giving Henderson a revenue sharing deal
for a year, a spokesman for Henderson said.
Charles Stanley, meanwhile, sold its Matterley Undervalued Assets
Fund to Miton in September, handing over the fund to former
co-manager George Godber after an earlier period when the fund had
moved with former fellow co-manager Henry Dixon to hedge fund GLG
Partners.
Such deals are unlikely in every case, analysts said, as managers do
not always leave on good terms, making it tough to negotiate an
agreement.
But a deal can also benefit investors, who are saved the cost of
moving funds, a likely response given how relatively unsuccessful UK
fund firms have been at finding star replacements, a Cass Business
School study showed.
"On average, when managers leave, you are going to get average
performance after that," Cass professor Andrew Clare said. "So the
(investor) instinct to leave is right."
($1 = 0.6839 British Pounds)
(Editing by Simon Jessop and David Holmes)
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