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    What To Do When Your Fund Manager Quits?

    Jul 31, 2024
    5 min
    4 Rating

    Imagine the scenario: You recently invested in a fund. The next morning, you learn that your fund manager is leaving. What will you do? Is it a big deal? Will your fund manager’s decision to quit impact your net gain? The article will answer these questions.

    Fund managers are an important part of the investment ecosystem. They are accountable for implementing strategies and managing portfolio trading activities. You can find them working in fund management with different kinds of funds, such as mutual, pension, trust, hedge funds, etc. They are vital to a fund’s performance, and many people seek their assistance to invest their hard-earned money because of their prominence or how the fund has performed over time.

    How Do You Deal With Your Fund Manager’s Exit?

    Below are a few general guidelines that must be remembered when your fund manager quits:-

    • Try to Know the Reasons for Quitting

      Due to the knowledge and expertise fund managers have, they are the most sought-after individuals. Often, they quit a firm because of better prospects or retirement. It should not worry you because the firm will replace them with individuals with the same knowledge and expertise or take other crucial steps to accommodate this abrupt change. Whatever the case, quitting can worry investors who take adequate measures to mitigate the risk they may have to endure if they decide to continue with the same firm. Regardless of the case, inquire about the reason for your fund manager’s departure.

    • Check Whether Your Fund Manager’s Exit Was Because Of a Switch Or Progress

      The major step you can take when your fund manager quits is to check whether they have changed the organisation or got promoted within the same firm. If it is a promotion, there is no need to worry. In case of a switch, you will have to search for other things to ponder whether to continue with the fund or withdraw from it after your fund manager’s departure.

    • Avoid Hurried Withdrawing From Your Fund

      Did you ever invest your hard-earned money in a Mutual Fund based on the fund manager’s proven track record and reputation? Seeing the manager quit in such cases may make you doubt your investment, and many of you may consider withdrawing the funds.

      Nevertheless, just because a fund manager with a good track record departs does not mean panic. Ideally, many applicable procedures do not change throughout the existence of a fund. Therefore, the basic idea is the same. The shift to a new fund manager is a wise decision if the financial establishment consists of trustworthy processes and skilled supporting staff. However, a few fund houses operate based on one individual managing them and can alter their methodologies when the firm’s head changes. This can undoubtedly a warning symbol. Therefore, it is suggested to research well before investing.

    • Modify Your Investment Strategy

      Investment methodologies ascertain how the fund will progress. If the financial methodology does not align with your investment goals, it is advisable to consider other options. If your funds’ investment philosophy, which was earlier in proper sync, changes when your manager quits, extra funds should be considered. Turnover ratios are the most applicable indicators for this aspect. They show a crucial change in case of significant transitions.

    • Closely Monitor Your Fund

      It is advisable to monitor the new fund manager's performance for some time before deciding whether to proceed with the same portfolio or withdraw. If you find that your fund is excessively churning, try to learn the reason for the fund. You will do well if you spend ample time investing in the causes instead of jumping to conclusions hastily. It is advisable to monitor the performance closely.

    • Take Action When Reallocation of Assets Occur

      A new fund manager often tries to change the ideology of the existing fund and shift it to various funnels that take the fund in a new direction. This move might impact the fund, making it more traditional or bold regarding risk. In such cases, investors should find the right fund managers that cater to their risk appetite and allot assets accordingly. Many asset management companies attempt to offset the risk in advance so that, as an investor, you do not have to face the consequences of leadership change. Nevertheless, you can research the fund managers' decisions and evaluate the change in your existing fund.

    Final Thoughts

    Fund managers carry out many investment strategies and manage portfolio trading activities. Even though when your fund manager leaves, it will not always affect your fund's performance. You can do a background check on your new fund manager before withdrawing the funds and then make an informed decision.

    While it is unfortunate when fund managers quit, a new leader can often bring benefits. Companies equipped with extensive expertise and solid backup plans typically retain investor confidence despite organisational instability. Investors should keep themselves updated with whatever takes place in the world of finance to offset losses that emerge because of a volatile market.

    Note: The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable

    Mutual Fund investments are subject to market risks, read all scheme related documents carefully.