Dealing with key-man risk
The fall-out from the exit of Hamish Douglass from Magellan is having wide-ranging effects as asset managers say the threat of key-man risk has become more pressing.
Chair and chief investment officer Douglass left Magellan on a temporary basis for medical reasons in February but outflows from the firm since the start of the year have reached $18 billion at the end of March.
The firm acted quickly to put a team in place in Douglass’ absence, appointing co-founder Chris Mackey as interim chief investment officer, and gave retention plans to remaining employees. However, the fall-out highlights the cult of a so-called ‘star manager’.
This was echoed when SG Hiscock appointed a new chief executive earlier this month and pointed out that the appointment of Giles Croker had been in development for several years. This included a period as co-CEO alongside Stephen Hiscock to reassure investors that the firm was in good hands.
Finally, GQG said the threat of key-man risk and the potential for a departure by a key manager was a topic being frequently raised by their investors and that any succession changes needed to be communicated in a clear, transparent way.
While no firm is the sum of one person, it cannot be denied that certain industry personalities carry weight with investors and help to increase inflows for the business.
Hopefully, the temporary exit of Douglass will be a wake-up call for investment houses to consider their succession planning and to implement structures for this eventuality. With the number of advisers on decline, the circumstance also applies to advisory firms particularly as many consider selling up their practices or handing over to younger staff.
In this issue, we also have a guide to managed accounts which explores the growing use of the vehicle as well as why more education is needed for advisers and the changing demographics for their usage.
AUTHOR
Laura Dew
Recommended for you
In this episode of Relative Return, host Laura Dew is joined by Andrew Lockhart, managing partner at Metrics Credit Partners, to discuss the attraction of real estate debt and why it can be a compelling option for portfolio diversification.
In this week’s episode of Relative Return Unplugged, AMP’s chief economist, Shane Oliver, joins us to break down Labor’s budget, focusing on its re-election strategy and cost-of-living support, and cautioning about the long-term impact of structural deficits, increased government spending, and potential risks to productivity growth.
In this episode of Relative Return, host Laura Dew chats with Mark Barnes, head of investment research, and Catherine Yoshimoto, director of product management, from FTSE Russell about markets in Donald Trump's second presidency and how US small caps are faring compared to their large-caps counterpart.
In this episode of Relative Return Unplugged, we examine the push for superannuation tax reforms aimed at saving $10 billion annually, as well as the immense pressure being placed on Treasurer Jim Chalmers ahead of the budget and Deloitte’s warning of a $26.1 billion deficit.
