The sudden and unexpected resignation of Hunter Hall International chief executive and chief investment officer (CIO), Peter Hall after 23 years at the helm, has compelled Morningstar to downgrade one of its funds from “neutral” to “negative”.
Morningstar’s Global Equity Sector Wrap July 2017 revealed the research firm decided to downgrade the Hunter Hall Global Value Ord due to the instability surrounding the investment manager’s team and ownership.
“The uncertainty surrounding Hunter Hall International in the wake of Peter Hall’s shock resignation in December 2016 highlights an enduring feature of the fund management industry: asset management is a people business, and key-person risk is an important consideration for investors,” the report said.
“Not only can the departure of a key portfolio manager with equity lead to substantial firm ownership changes, but it can also disrupt the consistency of the fundamental investment process.”
Morningstar noted Hall’s resignations had repercussions for Hunter Hall Value Growth Trust 3876 and Hunter Hall Global Value HHV. Hall was significant shareholder of Hunter Hall International HHV, resulting in an ownership tussle between Washington H. Soul Pattison SOL and Pinnacle Investment Management.
“But he was also a dominant personality in the firm. The ensuing uncertainty and distractions and the risk of further staff departures caused us to question the efficacy of the investment approach going forward,” the Morningstar report said.
The boutique firm, which Hall founded in 1993, had witnessed a constant flow of resignations from 2011 to 2013 but had maintained a strong group of knowledgeable investment professionals including interim CIO, James McDonald.
“However, when the founder and dominant member of the investment team abruptly resigns, this shows a significant disregard for investors,” the report said.
This exodus in staff had led Morningstar to hold the firm’s strategy on “neutral” but it downgraded it to “negative” following Hall’s resignation.
