A problem presented to mutual fund firms is how to prevent investors from redeeming shares when a star manager leaves a fund, Reuters reports. This has happened on more than a few occasions lately, with large companies like Janus and Liberty Wanger Asset Management losing some of their highest-rated stockpickers.
For example, Helen Young Hayes recently announced her retirement from Janus at age 40. This presents a significant problem on many levels, including how to replace her knowledge and expertise, but also how to retain the investors that signed up for the fund because of her fame.
With many firms marketing their respective funds around the investing ideals or reputation of a certain person, they are left scrambling to fill the void created by a departure. This, in addition to the fact that funds are operating at lower asset levels and rates of return, creates a significant problem with no clearly defined solution.
On some occasions funds do away with a product when a manager opts to leave. An example of this is Ira Unschuld, whose fund, the Schroder Ultra small-company fund, saw large outflows after his departure, and ultimately folded.
In some cases, the co-manager of the portfolio steps in, and major outflows are averted. This is the case with Liberty Wanger Asset Management, with Ralph Wanger announcing his retirement, and Chuck McQuaid stepping in to take up the reigns. However, Wangers wife, Leah Zell, is stepping down from her international stock fund, and this announcement has brought about some outflows.