When a fund manager leaves, investors must revisit the drawing board and decide whether or not they want to stay invested. How should one go about making this decision?
To begin with, one must evaluate the circumstances of exit. Why did the fund manager leave? Who will succeed? There are bound to be differences in the investment style and thought processes of any two fund managers. What is more important is the construct of the underlying portfolio.
Suppose the predecessor managed a portfolio of illiquid stocks that no longer work in the current market context. Then the incumbent fund manager must chart out a different path. So those who remain invested will bear the cost of restructuring. Ultimately, the call to exit is based on the merit of the portfolio and not on the fund managers.
Investors must carefully evaluate fund portfolios when the manager leaves. They definitely have a hidden story waiting to be discovered. That story can affect your portfolio returns and eventually impact your equity Investing.
