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Funds 209: Why Knowing Your Fund Manager Matters

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1.
Funds following the management team system _______.
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Use two or more people who work together to choose investments. Single-manager funds use one lead manager with others pitching in with research and trading. At multiple-manager funds, a number of managers work independently of each other. Team-managed funds use two or more people who work together.
2.
When a manager leaves a fund you own, what should you do?
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It depends. If the fund was team managed or if the family has other skilled managers on staff, staying the course isn't a bad idea. If it's an index fund or a fund from a category with a modest range of returns, there's probably no reason to sell at all.
3.
If you're choosing between two equally good funds, consider avoiding the one _______.
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Run by a single manager who's the only star in the fund family. While star managers may seem alluring, be sure that there's some back-up or bench strength in the family. Why? Because managers who do well at mediocre families eventually move on.
4.
Which type of fund is least affected by manager changes?
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Index funds. Because index funds are passively managed--in other words, their managers aren't actively choosing which securities to buy or to sell--manager changes don't matter much.
5.
Which type of fund is most affected by manager changes?
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One-manager funds. If a fund lists only one fund manager and that manager leaves, the fund may be poised for change. If only one member leaves from a team, in contrast, there should be some continuity in the fund's performance.