When experience walks out the door, whether or not to sell depends on the circumstances.
In the sometimes topsy-turvy ranks of mutual fund management, it can be tough for investors to find good funds with long-tenured managers. In fact, the average mutual fund manager stays just less than seven years on a fund. Why? A successful manager may leave to start his own firm or jump ship to a competitor. Or a fund without much in assets may merge into another fund. Or a rising star may be promoted to a larger fund at the same shop, and so on.
However, a small percentage of fund managers have stuck with one (or more) funds for the long haul. In fact, 59 funds (excluding share classes and only considering funds that still exist today) boast portfolio managers with tenures of at least 25 years.
Of course, the downside is that with really long tenure, the manager could well be near retirement. But even so, there are good reasons to invest with managers who have worked through a few market cycles. Below are some general tips, as well as some ideas about specific funds with long-tenured managers.
Well-Functioning Teams Mitigate Brain Drain
A long-tenured manager retiring is less of a worry when funds are run by big teams with individuals of varying levels of portfolio-management experience. Among those with at least one manager with at least 25 years of experience but numerous additional managers to pick up the slack are a slew of American Funds offerings including giants American Funds Income Fund of America
These team efforts from a big group help mitigate the negative impact that can come should an experienced skipper walk out the door, particularly when cultivating and compensating talent is part of the firm's culture. For example, American Funds portfolio manager Mike Shanahan, who had been onboard American Funds AMCAP
Big Shoes Can Be Hard, but Not Impossible, to Fill
Long-tenured managers are often part of a team, but nine of the longest-tenured managers are on their own at a fund's helm. In these cases, it's important to figure out whether the fund is a cult of personality, a process-driven one that might more easily transfer to a successor, or offered by an organization that has shown success in cultivating talented portfolio managers.
For funds like CGM Mutual
In other cases of sole portfolio managers, however, the future looks more promising in the event of the manager's departure. Take Analyst Pick T. Rowe Price Equity Income