For those clients who receive our weekly flash emails, you may have noticed a recent trend of portfolio managers quitting, getting fired, or similar turnover in product leadership. Obviously, there have been some high profile turnovers – Bill Gross, for instance. It may simply be a coincidence, but smaller shops seem to be experiencing higher turnover as well. There isn’t enough of a historical track record to know if there is genuinely a wave of PM turnover or if the recent changes are simply an accident of timing. However, one element of this trend that is most certainly NOT a fad is the replacement of single managers with teams of managers or analysts. It is absolutely a verifiable trend wherein upper management replaces the investment manager paradigm from a “rock star” schema to a team-oriented focus, with multiple levels of responsibility and oversight.
Naturally, the “rock stars” and “bond kings” may bristle under the burden of additional oversight and diffused authority. Bill Gross, discussing his recent move to Janus asserts, “Having a lot of people doesn't necessarily produce an efficient decision-making process. Sometimes it jams up the works.” Nevertheless, the flatter culture model, with distributed responsibilities, has been more attractive to investment management boutiques which are tired of enduring single points of failure from potentially volatile investment experts.