JAMES CARTHEW explores when and why boards choose to change their fund manager.
In my opinion, one of the greatest strengths of the investment companies
industry is its system of governance. Boards of independent directors work for and on behalf of investors. Boards’ ability to fire underperforming
managers helps to keep these managers on their toes. The option of calling time on an outdated investment objective helps ensure that investors are not trapped in dead-end investments.
The process of evolution is more red in tooth and claw in the world of investment companies than it is in the open-ended fund industry, where the fund management companies call all the shots and have no great incentive to kill a poorly performing fund as long as the fees continue to roll in. It is, I believe, one reason why, on average, investment companies outperform their open-ended rivals.
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