Asset managers consider key-man risk
Key-man risk is becoming an issue for investors who are seeking confirmation their asset managers have succession plans in place.
Earlier this month, SG Hiscock appointed a new chief executive in Giles Croker and highlighted his appointment had been “in development for a number of years”. This included Croker assuming senior internal operational roles, acting as joint CEO for five months and being an active contributor at board level.
The move highlighted how important it was for firms to implement succession plans to reduce dependence on any one person or ‘star manager’. This was highlighted by the temporary departure of Magellan founder Hamish Douglass which led to outflows for the firm.
Speaking to Money Management, founder Stephen Hiscock said: “There has been a succession plan in place for many years. The company has seen this as essential and there are succession plans in place for all senior levels of management.
“The board believes one of the most important functions it has, is to ensure the smoothest possible succession for all levels of the firm and has steps in place to ensure that all key roles have back-ups and plans.”
It was also important how the change was communicated to the market to reduce the likelihood of outflows.
“Major ratings agencies and asset consultants were informed directly, and clients were informed via a newsletter. The majority of external commitments and relationships, including clients, head of ESG, and the chief investment officer role, that Stephen has held in the past, will continue to be held by him. As such, the change from an external perspective is regarded as relatively modest.
“In conversations with clients, there has been very pleasing feedback that this is the right decision by the Company and the right time; given that the company and its funds are performing extremely well,” he said.
Laird Abernethy, managing director for Australia and New Zealand at GQG Partners, also said that key-man risk was becoming a common question asked by investors, particularly since the firm listed on the Australian Securities Exchange last October.
“A negative risk that we have had to counsel our clients through is around key person risk and that’s been elevated more recently. We are really focused on telling clients that we are a multi-generational business and have been thinking about succession planning since 2016.
“It is a really topical issue, everyone is asking us about it. It is important and needs to be done in a clear and transparent way.”
AUTHOR
Laura Dew
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