Scam

When does a trickle of fund manager departures turn into a flood? And how does a fund group steer clear of the Rooney Effect? Typically, the chairman meets these tricky questions head-on.

”How do you normally deal with a fund manager exodus?” I asked the chairman of the implausibly-sized investment company Second Coming Asset Management as we met for a pint or two of Really Don’t Need An English Lesson From A Fund Manager Thanks It Was Just A Bad Line And You Misheard at The Obnoxious Opening Gambit.

“The RSPCA, Battersea Dogs’ Home, maybe a zoo,” he replied. “If a manager has particularly irritated me, I also have the telephone numbers of some fairly relaxed butchers and a couple of Chinese restaurants.”

“Let me rephrase the question,” I said. “How do you normally deal with a fund manager exodus when most – maybe even all – of those managers are human?”

”You know Jose-Fredo de Bigbadwolff’s team of emerging meerkats are giving the Aberdeen mob a real run for their money?”

“Now that is trickier,” admitted the chairman. “Which of course partly explains this year’s change in Scam’s recruitment policy. Incidentally, have I told you how well it has been working out of late? You know Jose-Fredo de Bigbadwolff’s team of emerging meerkats are giving the Aberdeen mob a real run for their money over 2010?”

“I’ve never doubted the little chaps’ stockpicking skills for a moment,” I replied. “I am, however, less convinced about their selling discipline and will be interested to see how they cope should the latest round of queasing in ­America turn the emerging markets from froth to bubble as some of the economists I actually bother listening to seem to be suggesting.

“Anyway – fund manager exoduses?” (Scam continues below)

“In my experience it all comes down to what I believe is these days known as the tipping point,” said the chairman. “If you have the press on your side – and that’s a pretty big ’if’ in the current climate – then the misfortune of losing one fund manager and even the carelessness of losing two can be quickly glossed over.

“The trouble comes when it looks like a trickle has become a flood, which – again depending on the media’s patience – can be anywhere between three and six managers. Paradoxically, however, it is then that things can actually start improving because the balance of power switches back again from employee to employer.”

“Really?” I said. “How?”

“When a fund group is trying to manage a situation that is essentially death by a thousand cuts, potential managerial departures three and four and possibly five and six have a fair degree of bargaining power,” the chairman replied. “If they can be persuaded to stay, the trickle does not become a flood and you stand a chance of repairing the dam.

“Of course, if you do cave in to those chaps’ demands, there is no guarantee you will avoid what we might now call the Rooney Effect – which essentially means one day you cave and the next you turn up to work to find a long line of managers outside your office, all looking for pay rises and maybe a parking space.

“However, once you reach the tipping point with departure four or six or whatever, then you’re back in the driving seat. Once again you can laugh in the face of any manager who drops by in the mistaken belief they can basically blackmail you into a better deal because the firm can’t afford another departure.

“You see, reaching the tipping point means you’ve got a dead firm walking and, at that point, any further departures tend to be met with little more than a shrug from the press and you get to call some bluffs. The would-be quitter now has two choices – make good on his threat to go or start pulling with the rest of the crew and maybe, just maybe, the firm might be able to turn things around.”

“Wow, that is very nearly insightful,” I said. “And how should you handle the PR angle – announce each departure as and when it happens or save up a bunch for one really bad bit of news?”

“It can go either way but it’s a very fine line indeed,” replied the chairman. “It may seem a good idea at the time to save everything up to get it out of the way in one go, but misjudge things and, oops, you may well find you’ve created the tipping point all by yourself.”