How 2 Funds Are Navigating Recent Manager Shake-Ups

Asset-management firms face myriad challenges: a continued race to the bottom on fees, persistent flight of funds from active to passive strategies, attracting and retaining talent in an ever-competitive industry, and the perennial pursuit of alpha. It’s a confluence of factors pushing cost pressures.

In his recent piece, “Is Your Fund Affected by Asset Manager Layoffs?” Morningstar editorial director Dan Culloton explored some of these factors, including several firms that took matters into their own hands to adjust to the economic environment. BlackRock, State Street, and T. Rowe Price, to name just a few, announced layoffs during 2023. Investment teams don’t always bear the brunt of cost-cutting, but if your fund is underperforming and suffering from outflows, be aware that executives can act. These strategies shook up their portfolio management teams late in 2023—though not all of their own volition—and they may not be the last to do so in 2024.

A lean team and concerns about the firm’s ability to attract and retain talent led to Akre Focus Fund AKREX People and Parent ratings being downgraded to Average from Above Average, and the Morningstar Medalist Rating to Neutral from Bronze.

A generational handoff from founder Chuck Akre to his successors hasn’t worked as planned. Comanager Chris Cerrone left in September 2023, following Tom Saberhagen’s 2019 departure. John Neff, a manager since 2014, now runs the strategy solo. While Neff’s record is solid, it’s concerning that the firm hasn’t been able to attract and develop talent that sticks around. Beyond the two comanager departures, two associates have also left. Two fairly junior analysts who joined in 2019 and 2021, respectively, help out, though it’s too soon to tell whether they have staying power and to gauge their impact on a portfolio. Neff is the only person at the small shop who has lasted beyond Akre, raising questions about the firm’s ability to develop the next generation.

Columbia Small Cap Value II NSVAX has a new team. In November 2023, Columbia abruptly laid off managers Christian Stadlinger and Jarl Ginsberg, as well as their dedicated analyst, and Jeremy Javidi and Bryan Lassiter were appointed as replacements. With new managers needing time to settle in and bring their modified approach, the strategy’s People and Process ratings warranted a downgrade to Average from Above Average, and the Medalist Rating to Neutral from Bronze.

The move was a surprise given Stadlinger’s solid track record since the strategy’s mid-2002 inception. Javidi is a fine replacement as lead manager, though the abruptness of the changes warrants caution. Javidi took the lead on Columbia Small Cap Value I CSMIX in January 2013, and he has since posted encouraging results. The managers will tap Columbia Threadneedle’s central analyst team for additional insight into companies, but their workload bears watching; between the two portfolios, they are now responsible for more than 300 unique holdings.

Finally, Allspring International Equity WFEAX has a new team and approach. Managers Dale Winner and Venk Lal, who had run this strategy since 2012, were replaced in October 2023 after several years of weak results and sizable outflows. Jonathan Drexel and Paige Henderson took over. This upheaval reduced the strategy’s People rating to Average from Above Average, while its Neutral Medalist Rating was maintained.

Drexel and Henderson bring ample industry experience—roughly three and two decades, respectively—but their expertise running an international strategy like this one is limited. They’ve run Allspring International Dividend Payers (which matches their mandate here) since its launch in May 2022, so their record, though decent, is short. The approach of this strategy changed along with the managers. It focuses on balancing growth and income, seeking stocks that meet their quality, valuation, and business-catalyst criteria. This new approach is reasonable, but the managers must prove themselves as international investors rather than global, where their backgrounds lie.

This article first appeared in the February 2024 issue of Morningstar FundInvestor. Download a complimentary copy of FundInvestor by visiting this website.