There have been some great funds launched in the last few years – BlackRock Absolute Alpha is one and Schroders Income Maximiser another that immediately springs to mind.
Great products are partly about the fund manager and partly about timing. If the two collide you have a fund that can attract a lot of investor money and produce good performance.
So what happens when the manager or managers of a top fund abruptly jump ship – as Schroders’ Lance and Purves did last week, leaving Income Maximiser’s investors and their advisers in a dilemma? Should they stay or should they go?
Schroders acted quickly and sensibly and put the excellent Nick Kirrage jointly in charge, which should give everyone a bit of breathing space.
No doubt many other groups will be polishing their shoes, getting out on the road and trying to convince advisers they have an excellent income-generating product worthy of switching some, or all, of their client money from Maximiser into.
Situations like this can get the industry, and advisers in general, very bad reputations.
Ambulance-chasing is not good for anyone, let alone the client. But it is a legitimate question: should my client stick with the fund and see how Kirrage & Co perform or should they move now and take advantage of the cheaper switching that is likely to be available?
This comes down to a simple decision: why is the client in the fund, and can the new managers carry on doing what the old ones did?
However, there is a great issue for Purves and Lance themselves. What responsibility do they have towards advisers and investors who supported them?
They have jumped ship for the simple reason they think they can earn more money working for RWC Partners than they could at Schroders.
I suppose you cannot blame them for that, but until Income Maximiser took off they were just another pair of UK equity managers who were not that widely known and were decently paid – I am sure many advisers would have liked to be a pound behind them.
What Income Maximiser did for them was raise their status and their pay packet, but surely they have a responsibility to advisers and their clients – and Schroders – for bringing them to greater prominence? Or is that an old-fashioned, out-of-date response and does not matter?
It seems a long time since we were riding on the merry-go-round of managers leaving one group and joining another on a daily basis. Do moves like Lance and Purves’ signal the start of a similar phase of managers jumping ship? Let’s hope not, because just as corporate mergers often fail to produce real results, the movement of managers is not often of long-term benefit to investors.
I think Lance and Purves do have a responsibility to their investors and it is not simple enough just to deliver a good return over a relatively short period of time.
Investors usually place their money with long-term aims in funds like this and managers would do well to remember that. Lance and Purves should be careful about whose door they knock on to raise money once they arrive at RWC.
Lawrence Gosling is the founding editor of Investment Week. His views are his own, any comments to him at lawrencegosling@sky.com
