When to Fire Your Money Manager
When to Fire Your Money Manager
By: Wilmington Trust

Knowing when and why to fire an under-performing money manager is not always as easy as it seems. Most money managers and mutual funds either focus on specific types of securities or follow a particular investing style. Different classes of securities and investing styles tend to perform in different ways - sometimes following exact opposite patterns of performance. If you don't take the manager's specialization into account, you could wind up making the classic investment mistake of buying high and selling low.

Consider Mr. & Mrs. B, who had $20 million being managed by five different money managers, two of whom were losing money "big time." Not surprisingly, Mr. & Mrs. B were looking to replace these two managers. However, they had not looked at the managers' performance in light of their respective investment styles. Once they did, it was apparent that one of the under-performing managers was actually an outstanding manager for their value investment style. Unfortunately, value investing in general had not performed well recently. Mr. & Mrs. B realized that past performance of one asset class or investment style is not a good indicator of future performance. They concluded that they first needed to decide upon a proper asset allocation strategy - selecting the proper mix of asset classes and investment manager styles for their situation. Once they concluded that a value manager was an important part of their long-term asset allocation mix, it was clear their current value manager was a very good choice. That same analysis showed them that a third manager, who appeared to have performed well recently, was actually quite weak when compared with other managers of the same style.

Mr. & Mrs. B did replace two of their managers; but, after their asset allocation decision and manager style analysis, the managers replaced were not the ones they originally had planned to replace. They recognized that, while the managers' short-term performance might be a little less, their portfolio's long-term performance would most likely be both higher and less risky.

This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situations, and particular needs. This article is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought.

Help  |  Site Map  |  Privacy / Security  |  Terms of Use  |  Careers  |  Locations  |  Wilmington Trust Investment Advisors  |  Wilmington Funds  |  WTRIS  |  M&T Bank  |  Press Releases  |  Login

Need help, visit our Contact Us page.

© 2016 Wilmington Trust Corporation and its affiliates. All rights reserved.

Wilmington Trust is a registered service mark. Wilmington Trust Corporation is a wholly owned subsidiary of M&T Bank Corporation (M&T). Investment management and fiduciary services are provided by Wilmington Trust Company, operating in Delaware only, Wilmington Trust, N.A., a national bank, and M&T Bank. International corporate and institutional services are offered through Wilmington Trust Corporation's international affiliates. Loans, credit cards, retail and business deposits, and other business and personal banking services and products are offered by M&T Bank.

Wilmington Trust Investment Advisors, Inc., a subsidiary of M&T Bank, is a SEC-registered investment adviser providing investment management services to Wilmington Trust and M&T Bank's affiliates and clients.

 Investment and Insurance Products:
  • Are NOT Deposits.  • Are NOT FDIC-Insured.  • Are NOT Insured By Any Federal Government Agency.  • Have NO Bank Guarantee.  • May Go Down In Value.  

Brokerage services and insurance products are offered by M&T Securities, Inc. (member FINRA/SIPC), not by M&T Bank, Wilmington Trust Company, or Wilmington Trust, N.A.

Private Banking is the marketing name for an offering of M&T Bank deposit and loan products and services.

M&T Bank, Member FDIC and Equal Housing Lender NMLS #381076 Equal Housing Lender