Fund Warning Signs: Fund-Family Growth, Mergers, or Acquisitions

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Fund Warning Signs: Fund-Family Growth, Mergers, or Acquisitions

Why should it matter to your fund’s performance if the sponsoring fund family decides that it wants to add some new funds to its lineup? Or that it wants to be sold or become independent? It may not seem like much, but those things can distract managers from doing their jobs. After all, if your employer is growing rapidly or is on an acquisition binge, doesn’t that affect how you do your core job?

Once-great funds may also stall or lose their focus when their families expand and launch new offerings. Furthermore, funds can be forced to fill a different role as their family grows. For example, a former small-value fund could eventually become entrenched in mid- to large-cap territory and be replaced by new small-cap funds. The fund family would thus have funds that fill that small-cap role and the shop can’t afford redundancy.