The funds research industry's movers and shakers

Some of the key players in the funds research sector have recently undergone major executive and ownership changes. Milana Pokrajac examines how much impact - if any - such high profile moves could have on a research house.

The funds research industry has certainly experienced major changes over the past 18 months, with the past few weeks proving to be particularly exciting for the sector. The industry has witnessed changes of ownership, and major executive appointments, as well as departures. For some, the impacts of such events – if any – are yet to be seen.

Zurich Financial Services started the avalanche in early June, with the company announcing it would sell Lonsec to Financial Research Holdings (FRH) – a company substantially led by private equity specialist Mark Carnegie and superannuation ratings house SuperRatings. 

Just days after FRH managing director Jason Clarke said he expected little change for clients and staff of Lonsec, the then general manager of research, Grant Kennaway, departed the company – with his colleague Amanda Gillespie stepping into  his former role. However, Kennaway quickly found a new home at Morningstar, where he will head fund research for the Asia Pacific region, starting in November. 

Not long after Lonsec announcements, Standard & Poor's Funds Research (S&P) chief Mark Hoven announced he was leaving his role as managing director, and is yet to announce his next move. It is understood that Leanne Milton and José Ordonez will fill Hoven’s role.

Similar events occurred two years ago within another research house, when Stephen van Eyk resigned from the company that bears his name – van Eyk Research. His departure was followed by others, with Nigel Douglas (who replaced van Eyk as head of research) also leaving the company.

Stephen van Eyk's 25 per cent stake in the company was then purchased by New Zealand's Pyne Gould Corporation through a private equity deal last year, while Mark Thomas continued to manage the company, along with other newly appointed directors.

Thomas had experienced the aftermath of these events first hand, with van Eyk Research losing a couple of high profile contracts such as Westpac and Count Financial, which was then followed by job cuts.

Since then, the company has recruited several analysts and appointed new heads of research and ratings. Thomas said the impact of such high profile changes could be enormous, but it also came down to the culture of the organisation, noting that his company had a 20-year succession plan in place.

“In the situation when you’re talking about a funds management organisation where there is a portfolio manager who the organisation has built the process around and that person leaves – that’s pretty significant,” Thomas said.

“But if you’re talking about an organisation which has a number of senior people like Lonsec, Morningstar and ourselves – and then you’ve got a change at the top – well, it’s more of a cultural issue in the medium term that you need to be monitoring.

“That is because the person that’s left isn’t responsible for the entire performance of an offer,” Thomas added.

The claim that every organisation is greater than one individual was supported by Morningstar’s co-head of managed funds research, Chris Douglas.

Douglas said companies need to ensure there are people who will be able to quickly take over from those departing the company.

“But there is no doubt that it shakes things up a bit. It can impact morale and people’s view of where the business is heading…it creates a degree of uncertainty,” Douglas said.

However, he said that clients usually did not make decisions overnight.

“For a dealer group to change their research house is quite a long process, and an intensive process at that,” he said.

“In the short term, you don’t really see much impact, but longer term – it’s all about how these organisations react,” Douglas added.

Nonetheless, if past events are anything to go by, the coming 12 months and next year’s Money Management Rate the Raters survey results should prove interesting.