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In What Circumstances Would You Sell A Fund When The PM Departs

BondInvestor
edited February 2013 in Fund Discussions
At Learn Bonds, we really liked the Delaware High Yield Opportunities Fund. However, right after we gave a 5 star rating in December 2012, the PM left.

We had to figure out the following:
1) How much did the PM add to fund . .how much of the performance was due the investment approach, research and trading teams?
2) What is the track record of incoming PM? Will they be making changes to funds approach / strategy?

Here's the article:

http://www.learnbonds.com/will-this-five-star-fund-continue-to-thrive-after-the-pm-departs/

Comments

  • slick
    I departed UMBIX when David Williams left. I think many others did too. One of the great ones. It was one of my core funds. It was his intuition and experience that was the reason he consisently beat the S + P so many times.
  • BobCBobC
    We always tell our clients that we are not buying funds, we are hiring managers. We expect the same kind of relationship from the managers we hire as our clients expect of us: honesty, promptness in returning calls, listen to us, give us the information we need to make an educated decision. If a manager leaves, it is seldom a surprise nowadays. Kathleen Gaffney was an exception, but fortunately the rest of that team (LSBDX) is still in place.

    When would we leave if a manager departs?
    If we were not told ahead of time, and we found out it had been in the works for weeks/months.
    If we did not think the new manager had the appropriate experience or strong enough track record.
    If the new manager had not worked as part of the departing manager's team and if the departing manager's investment style was truly unique and hard to duplicate.

    We take a lot of time to develop relationships with and vet fund managers and their teams, so we seldom get surprises (fortunately). Occasionally a manager leaves to start a new fund, and we might choose to follow, but this is rare. We would first want to know the circumstances of the departure.

    Slick mentioned UMBIX, which is a good example. We actually left that fund when Columbia Funds were sold to Ameriprise. We had owned UMBIX since 2003, when it was owned by U.S. Trust, before it was bought by Nations Funds and became part of the Columbia group. Our experience with and knowledge of Ameriprise was pretty bad, and combined with Mr. Williams' comments that he would retire fairly soon, we decided to sell in early 2010. We don't always get that fortunate in our calls!

    Yeah, it is a bit easier for an RIA of our size to develop these relationships and get information, but retail investors can now join manager conference calls and hear what is going on with the fund. Most fund companies' web sites have information on when these calls will take place. It is a great way to be informed about what your managers (NOT your funds) are doing.
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