Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
What to do when your star portfolio manager leaves
As is almost always the case, money talks. When a star portfolio manager suddenly resigns after recording spectacular gains, there is a good chance they have been poached within the funds management industry by a competitor waving more money. Sometimes entire teams leave altogether, or a high-profile portfolio manager may walk out, for one reason or another.
As an adviser, it is highly frustrating. It takes time to get to know a portfolio manager, their investment style and stock-picking ability. It takes time to gain confidence in their capacity to outperform. And it’s the trust you place with the portfolio manager that ultimately supports your decision to invest your clients’ money in their fund.
And these days it is hard to find a good portfolio manager that not only outperforms but does so consistently. There has been a spate of recent resignations that have left many advisers scratching their heads wondering what to do. A good example of this was the recent loss of Platinum Asset Management’s lead portfolio manager on its $5.2 billion Asia-ex Japan fund, Joseph Lai. He resigned suddenly over the Christmas period and there has been not a word since. He had signed off, however, on a stellar year for the group’s top-performing strategy. Lai became co-manager of the strategy in 2011 and has been running the Asia ex-Japan managed fund since 2014. The Asia ex-Japan strategy has been a market darling for Platinum in recent years. Its return for the 12 months to November was 29.1 per cent – nearly double the MSCI Asia ex-Japan index score of 14.9 per cent.
With a strong record, it is strange that his departure was somewhat brushed-over by Platinum. Could he be following one of his predecessors? I doubt it. For those that don’t know, Lai was promoted to run the successful Asia fund after Jacob Mitchell, a former deputy CIO and long-time Platinum portfolio manager, resigned from the firm ahead of launching his own boutique, Antipodes Asset Management, in 2015. The more likely scenario is that Lai has been poached by one of the top-tier global fund managers seeking to expand their presence in the region.
What next for Platinum?
Morningstar analysts placed the Platinum Asia ETF “under review” after Lai’s resignation. Despite having a large and talented pool of investment professionals, Morningstar says there’s uncertainty given Lai’s resignation.
The exit of a portfolio manager that has a stellar reputation is a major change that advisers simply cannot ignore. If history is anything to go by, funds with great performance records have been seen to deteriorate after a portfolio manager’s exit. It can become a herculean task to replace skills, knowledge and experience at the flick of a switch.
In saying that, we also suggest advisers give the incoming portfolio manager a chance to perform. If possible, meet with the new portfolio manager and understand their investment style and skills. Keep an eye on the fund’s performance. If the fund starts to under-perform against the benchmark for successive quarters, then perhaps it’s time to sell. Just remember, there is no need to panic and sell immediately in the case of a portfolio manager resignation. The portfolio won’t change overnight. Find out as much as possible about the new portfolio manager and make an informed decision.
