According to a report in the Australian Financial Review (AFR), ratings house Morningstar has placed certain funds managed by a subsidiary of AMP Limited (ASX: AMP) on review.
The reason given for the re-assessment of the funds is because of recent staff changes within AMP's Australian equities funds management team. For shareholders in AMP there doesn't appear to be any cause for alarm.
The employees that are believed to be leaving are responsible for managing several billion dollars, but in the scheme of AMP's total funds under management (FUM) this is inconsequential. Hence, while there is the possibility that investors in these funds may choose to alter their allocations due to a change in portfolio managers, any redemption of FUM would be unlikely to have a noticeable effect on the financial services giant.
Beware of key person risk
'Boutique funds' is a term generally used in reference to privately owned fund management companies. Boutiques usually will have smaller FUM and are run by founders. Due to their private ownership structure, fewer investors, smaller FUM and smaller teams there is almost always greater so-called 'key person risk' within boutiques than at their larger corporate peers like AMP.
Key person risk can however also be a problem for some corporate fund managers, particularly when it is a firm that has made a shift from 'boutique' fund manager to listed entity. Perhaps the biggest example of this on the ASX is Platinum Asset Management Limited (ASX: PTM) which is a company synonymous with its co-founder Kerr Neilson.
While the company has developed a team of talented portfolio managers and analysts, arguably Neilson still poses a 'key man risk' scenario for shareholders. It can also cause a problem for long term corporate fund management firms who have portfolio managers who reach 'rock-star' status. This situation occurred at Perpetual Limited (ASX: PPT) a few years ago when the highly regarded John Sevior announced that he was leaving. Sevior's decision led to a significant disruption for the group and corresponding volatility in share price.
