Change of Management: What to Do When a Fund Manager Leaves

If you’re thinking of fleeing an actively managed fund just because its manager has departed, think again. There’s no apparent correlation between a fund’s returns and a change in management, according to research from Morningstar.1

That’s not to say a fund’s management team isn’t a determining factor in performance, says Jim Peterson, chief investment officer at Charles Schwab Investment Advisory (CSIA). However, who is managing a fund is often less important than how a fund is being managed.

CSIA, for example, favors funds with a disciplined, identifiable investment process run by a team of two or more, over those that rely on a single star portfolio manager. With that structure in place, “the departure of any one individual is less likely to have a meaningful impact on future performance,” Jim notes.

Of course, it can sometimes be difficult for the average investor to assess a management team’s process, so Jim suggests turning to the experts. “Look for resources that do the legwork for you,” he says. “CSIA, for instance, evaluates every fund on the Schwab Mutual Fund OneSource Select List® on both qualitative and quantitative factors—including investment strategy and management structure.

1Madison Sargis and Kai Chang, The Aftermath of Fund Management Change, Morningstar Quantitative Research, 07/24/2017.

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