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Succession Concerns Limit These Funds' Long-Term Prospects

The departure of a star manager leaves a tough act to follow.

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When Morningstar manager research analysts evaluate a fund’s management team, they don’t just look at the current line-up. They also think about any succession issues for portfolio managers who are nearing or beyond retirement age. The goal is to hold the fund for the long run, after all, so Morningstar analysts want to be confident about the plan for navigating likely retirements. Some firms have clear plans with strong successors lined up. Others do not.

Below, we list four funds with veteran managers who are closer to the ends of their careers than the beginnings. These managers have not announced any intention to retire, but the Morningstar analyst who covers the fund has expressed concern about the transition.

Parnassus Endeavor (PARWX)
Jerome Dodson has built an excellent record while leading Parnassus Endeavor since 2005. He has demonstrated a unique ability to pick stocks, but at 75, he is in the later stages of his career, and succession concerns limit the both fund’s Morningstar Analyst Rating and its People Pillar rating to Neutral. The firm added Billy Hwan as a comanager here in May 2018. With just a short and unremarkable record running money elsewhere, Hwan is still unproven. In addition, Dodson’s high-conviction and contrarian approach will be challenging for another manager to replicate. It is uncertain that this fund can maintain its success when Dodson eventually decides to step away.

Gabelli Small Cap Growth (GCASX
Value-investing icon Mario Gabelli has been the sole manager for Gabelli Small Cap Growth since its 1991 inception. The fund benefits from his significant experience, but its future is uncertain. At 76, Gabelli hasn’t announced a formal succession plan, which largely explains the fund’s Neutral Analyst Rating and Neutral People Pillar rating. The firm recently added comanagers elsewhere, such as at Gabelli Utilities GABUX, but it is unclear how or whether this fund will successfully transition to the next generation. This is also a concern at other funds that list Gabelli as the only manager, such as Neutral-rated Gabelli Equity Income GCAEX.(

Invesco Oppenheimer Global Opportunities (OPGIX
Frank Jennings has run Invesco Oppenheimer Global Opportunities since 1995. He is a talented manager with an excellent long-term record, but, in his early 70s, he is in the latter part of his career. He has a potential successor in place, Máire Lane, who joined his team in 2017 and is the only analyst dedicated to this fund. Lane’s presence and ability to take over are encouraging, but it is uncertain whether this fund could continue its success in her hands, resulting in a Neutral Analyst Rating and Neutral People Pillar rating. Lane has no record running money, and the approach that Jennings has crafted is difficult to execute because of its risks, quirks, and the patience it requires.(

Pioneer Equity Income (PEQIX)
John Carey has led Pioneer Equity Income since its 1990 inception, and comanager Walter Hunnewell has worked closely with Carey since 2001. Carey and Hunnewell are skilled investors who have steered this fund to a solid record, but they are in the second half of their careers. The lack of a solid succession plan gives pause and justifies the fund’s Neutral Analyst Rating and Neutral People Pillar rating. While Sammi Truong joined as a third comanager in early 2018, her quantitative background may limit her contributions beyond risk management, since this fund uses a fundamental approach.

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