Unlocking Real Value Blog

AK In The News: Poor Returns Top Reason For Manager Firing

Fundfire, a Financial Times Service, today published results of a poll in which financial services professionals were asked what they believed was the top reason that institutional money managers get fired. They asked me to comment on the results.

55% or respondents said that institutional investors and consultants fire managers based on poor performance more than any other reason. The second most popular answer, at a distant 20%, was personnel turnover, followed at 12% by poor client service/communications.

These results are somewhat surprising and somewhat not surprising. The answer makes sense emotionally, as poor performance is something that is hard to ignore and hits you where it hurts! The results were somewhat surprising, however, in that Fundfire just published a study by Towers Watson that concluded that institutions are better off staying with managers during poor performance – all things being equal – in part because of the cynical nature of the investment business.

All in all, however, the results were not surprising for two reasons. First, we don’t know the make-up of the respondents, because Fundfire is read by a wide variety of industry participants. I would guess that if the poll were limited to consultants and fiduciaries, the results would have been somewhat different. Also, they asked “why” managers get fired instead of why they “should” get fired – there is a big difference.

What is my take on the question? To quote the article: “Klausner ranks change in investment process or style drift as the most important reason why managers should get fired, followed by personnel turnover and then poor client servicing. However, institutions should not ignore under performance either. “Poor investment performance is always a concern, especially if it is over extended periods of time, but should be looked at in the context of these other factors as well,” he says.”

Poll semantics aside, an interesting topic to think about. What do you think?


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