Sometimes, however, managers find it impossible to repeat their earlier success with a different fund and investors have been sorely disappointed.
Here FE Trustnet asks why some high-profile managers struggled when they either took over from a highly rated predecessor, tried to turn around a failing portfolio or just started up a new fund.
Anthony Bolton
It may seem cruel to include industry legend Anthony Bolton in the list, given the fact he was one of the most successful UK managers ever seen when he was in charge of Fidelity’s flagship Special Situations portfolio.
However Gavin Haynes, managing director at Whitechurch, says that Bolton’s move to the Far East has tarnished his glittering career. Bolton launched his Fidelity China Special Situations trust in April 2004, just over two years after he had stepped down as manager of the UK-focused Fidelity Special Situations fund. He continued to use his contrarian/value approach, but that meant he struggled.
"Bolton had an exceptional track record before he started up his investment trust out in China," Haynes said.
"Unfortunately, however, it turned out to be a very different market to invest in and also a very difficult time to start up a fund. There was a lot of expectation and a lot of money followed him, but unfortunately it didn’t quite work out."
According to FE Analytics, Bolton’s Fidelity China Special Situations has lost money since it was launched and has also underperformed its MSCI China benchmark.
Performance of trust vs index since April 2010
Source: FE Analytics
One of the major reasons why the trust has struggled is that Chinese equities have done the same, as fears have mounted over slower economic growth in the country.
His contrarian approach and his focus on mid and small caps compounded that underperformance.
Tim Russell
Tim Cockerill, who is investment director at Rowan Dartington, says that Cazenove’s Tim Russell was expected to be a success with his Cazenove UK Absolute Target fund, but unfortunately he did not meet those expectations.
"I am always hesitant to focus on the negatives," Cockerill said.
"However, one that occurs to me that wasn’t quite as good as others was the Cazenove UK Absolute Target fund and Tim Russell."
"He had built up quite a good reputation in the income and growth space. He was their flagship manager, but it just didn’t seem to work."
"You can ‘um and ah’ about why that was the case, but I think the combination of long and short positions contributed."
"He had been a very good investor in long-only positions, but I think the short side caused problems which meant the fund disappointed," he added.
Russell launched the £309m Cazenove UK Absolute Target fund in July 2008 and eventually stood down in June 2011.
Over that time, the fund returned 3.4 per cent while the average portfolio in the IMA Targeted Absolute Return sector made more than 10 per cent.
Performance of fund vs sector from July 2008 to June 2011
Source: FE Analytics
Following Russell’s departure, the fund was taken over by Steve Cordell and Julie Dean. It has been one of the highest returning funds in the sector since the management change.
Stephen Whittaker
Darius McDermott, managing director at Chelsea Financial, says that a lot was expected of Stephen Whittaker when he took over the New Star UK Growth fund; however, he was caught out in rather spectacular style by the financial crisis.
"He took over the fund from Alan Miller, having proved himself as manager of the Invesco Perpetual UK Growth fund, but he did struggle to replicate that performance," McDermott said.
Obviously, Whittaker was by no-means alone when his fund was hit by the financial crash. However, his high weighting to UK banks at the time had a real impact on the New Star fund’s performance.
He was quoted in the press in May 2008 saying that he would buy as many discounted bank shares as he could get his hands on, which, with the benefit of hindsight, was not the best policy.
Rob Morgan, pensions and investment analyst at Charles Stanley Direct, says that while it is easy to knock Whittaker’s decision now, investors should remember that a lot of managers were doing the same.
"He wasn’t alone in his decision, but it did lead to his downfall. This was a flagship fund and it wasn’t good that it was haemorrhaging money," Morgan said.
David Mitchinson
Morgan says that David Mitchinson was one of the poster boys of the Japan sector when he moved from AXA Framlington to JPM in 2004.
Mitchinson had managed the AXA Framlington Japan fund between February 2002 and July 2004, over which time it had been the best-performing portfolio in the IMA Japan sector, with returns of more than 100 per cent, beating the TOPIX by around 90 percentage points.
However, as Morgan explains, it all went south from there.
"He had been running a very, very successful Japan fund at AXA Framlington before he was picked up by JPM. He came with great fanfare, but just didn’t deliver," Morgan said.
"A lot of people expected him to continue where he left off. However, he was fairly heavy in mid and small caps and when he moved to JPM this just wasn’t the right strategy, which didn’t do him any favours at all," he added.
Our data shows that during Mitchinson’s tenure as manager of the JPM Japan fund between September 2004 and September 2012, the portfolio lost 13.16 per cent.
Performance of fund vs sector and index from Sep 04 to Sep 12
Source: FE Analytics
The average fund in the IMA Japan sector returned 8.1 per cent over that time while the benchmark returned 18 per cent. Those returns meant that Mitchinson’s fund sat third from bottom in the sector performance tables.
