Peter Rutter left Royal London Asset Management (RLAM) last year to set up his own firm, Life Cycle Investment Partners. Fast forward to today, and the firm is managing more than A$2bn (£1bn) in assets.
At RLAM, Rutter was hailed as a “star manager.” So why leave? Could this be another Neil Woodford situation? Remember him? About 300,000 people lost money when the Woodford Equity Income Fund was frozen in 2019. Woodford was the golden boy at Invesco with billions under management before he decided to go solo. How’d that work out for him?
Here’s the thing: if you’re a “star manager,” why not pocket the bigger slice of the pie by running your own firm? If the investors keep winning, why shouldn’t the manager take the lion’s share? Sounds like a win-win, right?
The problem is, not all “star managers” stay stars. In fact, it’s pretty much guaranteed that their luck will run out. But hey, if they’re smart, they’ll hire other smart people to carry the torch, passing on their “dark arts” to keep the good times rolling for investors while still raking in the rewards.
Yet, no matter how logical that sounds, it almost never works out that way. So, then you have to ask: What made them a “star manager” in the first place?
Pick up the FT or browse Morningstar’s list of funds, and you’ll find thousands of managers, each one claiming to be a genius. But if they’re all so smart, why do only a few actually outperform?
The answer? Luck. Simple as that.
Rutter’s probably been lucky. And let’s be honest—his luck could very well run out too. But right now, he’s got thousands of investors, whether by their own choice or nudged by financial advisers, believing in his “star quality.”
But wait, it’s not just Rutter. There’s a new player on the block: Ben Whitmore, the former star fund manager from Jupiter, just launched his first fund under the new Brickwood brand. After managing £10bn at Jupiter, Whitmore’s now focusing on undervalued UK companies that many investors have turned their backs on. Investors love a comeback story, but let’s be honest—there’s also a lot of risk involved when these “star managers” take the plunge into the unknown. Will Whitmore’s gamble pay off, or will it go the way of Woodford?
If Rutter or Whitmore don’t go the way of Woodford—and keep performing (or at least don’t mess it up)—they’ll both be “extremely” wealthy. It’s a win for them whether they keep outperforming or eventually stumble.
So, why don’t investors use a little logic instead of chasing the next big name? If they did, maybe their decisions—and outcomes—would improve.
Woodford, Rutter, Whitmore… all these “star managers” are essentially a gamble. And luck’s the only thing that’ll determine who wins.
The Wealth Coach, an independent financial advisory firm based in the UK. Nic Round, Chartered Wealth Manager.
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