Someone taking on the world and winning. It is a Hollywood staple, from James Bond to superheroes such as Superman or Wonder Woman.
Yet when it comes to investing, relying on one man or woman to look after your cash can be problematic, as avid readers of Trustnet will have spotted over the past few weeks.
This week, Abraham Darwyne wrote that Sebastian Lyon sold out of Berkshire Hathaway due to the “key man risk” involved.
He argued that there was not enough succession planning behind chairman and chief executive Warren Buffett, who at 91 years young is still one of the most respected investors in the world but is firmly at the end of his career.
The same argument has been lobbed at funds in recent months. Earlier this month interactive investor placed SDL UK Buffettology under review.
Somewhat ironically, the fund invests in the same way as Buffett. This time however there were fears that manager Keith Ashworth-Lord did not have enough support.
And last month, Hargreaves Lansdown dropped Unicorn Outstanding British Companies from its own HL Wealth Shortlist for similar reasons.
These examples stress the need for investors to understand firstly any succession planning in place, but also question who is in charge of a fund should something happen to the lead manager. If they are off sick for the day, who is in charge of your money?
While these stories are helpful to investors that own these particular funds, but there must surely be other instances where this is happening that is not covered because the funds do not happen to be on a best-buy list.
So how can we as ordinary people with no access to the management team or the inner workings of fund groups possibly know when key person risk is a potential issue?
The unfortunate answer is, we can’t really. Trustnet spoke with one adviser this week who said there was “not a lot” people could do.
However, he gave some rough guidelines. Boutique fund groups are more likely to have this issue than larger asset managers.
He used Fidelity as an example. “If Alex Wright at Fidelity Special Situations leaves, someone will be promoted,” he said.
Some signs to look for are the age of the fund manager if available – a topic we covered earlier this week – while checking if there are co-managers or deputy managers on the fund.
But in truth it is all pretty vague. What would be ideal, is for asset managers to disclose how many people work on a fund and to state the hierarchy in their annual reports. Until then, investing in bigger fund groups or portfolios with multiple managers takes away some of this risk.