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Fund Spy

Manager Rivalries in the Fund Industry

Some managers go toe-to-toe with former colleagues.

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Although it doesn’t match the intensity or following of Red Sox versus Yankees in baseball, or Duke versus North Carolina in college basketball, the mutual fund industry is rife with competition. Morningstar Manager Research Analysts often examine a fund manager relative to their benchmark and peer group, yet some managers measure themselves against past coworkers. And while top managers are often highly motivated, well compensated, and entrepreneurial, competing with a former boss or protégé may add extra incentive.

In such cases, there’s an incumbent and a prospect. Challengers hold a few advantages. First, they have a specialized investment universe from their previous work. Indeed, many former subordinates share several names with their old employers. New managers with smaller asset bases can also nimbly reposition around best ideas. Yet there are benefits to scale. Entrenched managers typically claim hulking asset bases and therefore spend less time on administrative tasks. Incumbents are also well resourced, boasting talented analyst benches and dedicated portfolio specialists. New managers, on the other hand, need to build their own asset base, which takes them away from portfolio management. Moreover, they need to recruit and form their own supporting casts.

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Tom Nations, CFP® does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.