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Fund Spy

Not All Manager Changes Are Equal

Some manager replacements are more hopeful than others.

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Portfolio manager turnover often raises a red flag. It's not uncommon, for example, for plan sponsors of 401(k) or pension plans to have written policies that put funds on a watchlist--a penalty box of sorts--whenever there's a change at the helm. There's good reason for doing so. When a good manager leaves or retires, it can be the beginning of a fund's slide into mediocrity, or worse. It can also lead to strategy changes or indicate that there's something bigger going on at the firm.

But that's not always the case. Morningstar analysts have no formal watchlist, but we often put the Analyst Ratings of funds that have changed skippers under review. After further due diligence, we sometimes find the change is an improvement. The following examples demonstrate some instances in which a shakeup at the top actually improves a fund's prospects.

Janet Yang, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.