Investment Trusts: Fund manager departures are easy to see through

Fund manager research is like Strictly Come Dancing. Fund managers seek to put their best foot forward, showing us how they manage money on the dance floor of global stock markets.

Analysts are the judges, trying to look through the spin, the bluff and the bluster, and work out whether we would want to put that particular fund manager through to the next round, into the full glare of our fund-buying audience.

With our financial interests generally intertwined, it baffles me why fund managers are occasionally so economical with the truth in discussing fund matters with analysts. The most common example of this is when a fund manager leaves.

Up until that point, the manager has his or her name on all the marketing material, is quite happy to be interviewed in the press, and comes to your office on a regular basis to give you updates.

Then he departs, at which point a vast team of marketing professionals try to work out a news management strategy. The code of such announcements is not hard to understand.

Variations on ‘exploring new opportunities outside the industry’ or ‘restructuring’ means, to all intents and purposes, ‘sacked’. ‘Taking a break from fund management’ is generally a euphemism for ‘has made so much money he doesn’t know what to do with it’.

I will never know everything that goes on inside every fund management house. But it is not difficult to find an unvarnished version of the story behind a departure.

A management house telling me the manager ‘hadn’t really been running the portfolio for some time’ and ‘his departure won’t affect how the trust is run’ rings alarm bells. The most grating excuse is ‘our funds use a disciplined process and so the departure of X will not make a difference to its performance’.

Fund management is a people industry. People run funds – with the obvious exception of quantitative strategies, computers don’t. Even then, it is humans who created the models and trading platforms.

An investment process is designed and applied by people. Many people leave their job because of personal differences, for example, they don’t like their boss and/or vice versa.