S&P finds portfolio manager tenure has influence on fund performance

Portfolio manager tenure is playing a role in the performance of Australian equity funds. S&P’s analysis of its rated long-only Australian equity funds shows that managers with long tenure are associated with stronger and more persistent excess returns compared to short-tenured peers.

Standard & Poor’s Fund Services analyst Justine Gorman said: “In today’s competitive funds management marketplace, employee retention is a critical factor in the performance of the business, with the loss of a key employee potentially having a dramatic effect on a fund manager’s success.”

“Businesses lose intellectual capacity and corporate knowledge when a portfolio manager leaves. If not managed carefully, the repercussions of manager turnover can adversely affect morale, investor relationships, and the fund manager’s corporate brand,” said Ms Gorman.

The report also discusses why portfolio manager turnover in Australia has been so high, what effect departures have on investment teams, and how some teams are structured to limit the effect of sudden departures.