The importance of manager tenure

These four top-performing Canadian equity mutual funds have had the same lead managers for 15 years or more.

Jeffrey Bunce, CFA 13 April, 2017 | 5:00PM

 

 

One of the factors we consider when assigning a qualitative analyst rating to a fund, is manager tenure. If you think about it, there’s good reason for there to be a connection between the length of a manager’s tenure on a fund and the fund’s performance. If a manager has kept his job for a long time, then it probably means he’s been doing it well. Also, if a manager has stuck with his firm over a number of years, then he’s likely happy or satisfied with where he’s at. Long tenured managers have also likely honed and refined their process and have developed strong working relationships with colleagues over the years. These are all positive indicators that can give hints at whether a fund will be successful on a go-forward basis.

Studying the Canadian equity fund universe, we see that funds that have some of the longest manager tenures, have the best performance over the past ten years. Manager Jim Hall has been the lead on the Gold-rated Mawer Canadian Equity for over 17 years and his fund tops the charts over the past 10 years. Second place in terms of 10 year returns is the Silver-rated Franklin Bissett Canadian Equity. Garey Aitken has been running this fund for greater than 15 years. Other funds finishing in the top decile over the past 10 years include the Gold-rated Beutel Goodman Canadian Equity, where Mark Thomson has been the lead manager for almost 23 years, and the Bronze-rated Fidelity Canadian Disciplined Equity, which has had Andrew Marchese at the helm since the fourth quarter of 1998.

Manager tenure isn’t the be-all, end-all of fund selection, though. To be sure, there are lots of funds with long-tenured managers that have produced middling results. Many other pieces--such as the execution of the fund’s process, the parent firm’s overall treatment of investors and the fund’s price tag--factor into our qualitative analyst ratings. However, it isn’t surprising, given the long and successful tenure of the managers I’ve mentioned, that the funds they run earn a Morningstar Analyst Medalist Rating.

About Author

Jeffrey Bunce, CFA

Jeffrey Bunce, CFA  Jeffrey Bunce, CFA, is a senior investment analyst for Morningstar’s Investment Management group.