While mutal fund investors have enjoyed a pretty great 2013 so far, funds have been quietly shaking up their management teams "at an alarming clip," according to U.S. News & World Report's Ron Silverblatt.
But so what? If funds are performing well and investors are happy, why should we care?
"Management changes can have a wide range of implications," Silverblatt explains. "First, a new manager can mean a change in a fund's strategy, which in turn can mean that a product that was once a good fit for an investor no longer belongs in that investor's portfolio."
On top of that, management has everything to do with fund performance. He points out a 2010 report by the United Kingdom's Pensions Institute which found "losing a top-decile manager results in a 1.44 percentage points lower performance in the following year compared with winner funds that keep their star manager."
That was based on the performance of nearly 4,000 U.S. equity funds between 1992 and 2007.
So what's a worried investor to do when the higher-ups get shaken up?
Study the new manager's track record and then hang on tight, Silverblatt says: "It is often wise for investors to give the new management team a bit of time to prove itself."
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