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Change of Management: What to Do When a Fund Manager Leaves

If you’re thinking of fleeing an actively managed fund just because its manager has departed, think again. There’s no apparent correlation between a fund’s returns and a change in management, according to research from Morningstar.1

That’s not to say a fund’s management team isn’t a determining factor in performance, says Jim Peterson, chief investment officer at Charles Schwab Investment Advisory (CSIA). However, who is managing a fund is often less important than how a fund is being managed.

CSIA, for example, favors funds with a disciplined, identifiable investment process run by a team of two or more, over those that rely on a single star portfolio manager. With that structure in place, “the departure of any one individual is less likely to have a meaningful impact on future performance,” Jim notes.

Of course, it can sometimes be difficult for the average investor to assess a management team’s process, so Jim suggests turning to the experts. “Look for resources that do the legwork for you,” he says. “CSIA, for instance, evaluates every fund on the Schwab Mutual Fund OneSource Select List® on both qualitative and quantitative factors—including investment strategy and management structure.

1Madison Sargis and Kai Chang, The Aftermath of Fund Management Change, Morningstar Quantitative Research, 07/24/2017.

What You Can Do Next

View the upside/downside capture ratio for dozens of pre-screened funds on the Schwab Mutual Fund OneSource Select List®.

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Important Disclosures

Investors should consider carefully information contained in the prospectus or, if available, the summary prospectus, including investment objectives, risks, charges and expenses. You can request a prospectus by calling Schwab at 800-435-4000. Please read the prospectus carefully before investing.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers are obtained from what are considered reliable sources. However, their accuracy, completeness and reliability cannot be guaranteed.

Charles Schwab Investment Advisory, Inc., is a registered investment advisor and an affiliate of Charles Schwab & Co., Inc.

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