Industry titans weigh in on star manager culture

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Neil Woodford has admitted it is difficult to assure staff and clients that a fund is sustainable beyond one individual in a discussion about star manager culture.

His former employer Invesco Perpetual saw £5bn in outflows in the year following his departure in 2014. He now runs the Woodford Equity Income fund and the Woodford Patient Capital Trust.

“It’s a really difficult challenge for people like us to create the multigenerational characteristic in a fund business,” Woodford told an audience hosted by Jupiter Asset Management.

“The biggest challenge is maintaining culture, which gives you the foundations to create longevity beyond my professional life.”

Woodford was joined by Terry Smith, chief executive of Fundsmith, who said he thought people worried about succession “a little too much”. “It’s not like being Berkshire Hathaway when Warren Buffett dies, where a rather large discount may emerge temporarily.”

However, he confirmed his firm had leadership and ownership succession plans in place. Julian Robins, head of research at Fundsmith, will take over the firm, Smith confirmed, while ownership would be an “automatic” process from the fund’s income.

James Findlay, who runs the Findlay Park American Fund, said the team at his fund had been evolving in the last couple of years. “We’ve been much stricter in making sure the whole team is making sure every single stock in the investment portfolio meets the investment philosophy,” Findlay said.

The culture of star managers is in decline, according to a report released by PwC last month, as both senior executives and clients recognise the material risks associated with promoting an individual instead of a team.

Firms will increasingly focus on succession planning as well as remuneration structures that reward team decisions and outcomes, PwC said.

Woodford was quoted this week saying that the investment profession has a whole has become too complex.