Fund families may use teams to manage their funds. Some use different teams to manage different types of funds, e.g. Baird has one team managing its taxable bond funds and a second team managing its muni bond funds. But it uses completely different teams for two of its equity funds (large cap and mid cap). (Its small/mid and small cap funds are managed by the same individual manager.)
I'm wondering how one assesses management/family risk. Many of us are familiar with Janus' dot-com implosion - its funds had huge overlap (same research team, I believe), regardless of who managed the individual funds. The question here is a little more subtle. If the same team (or individual manager) is managing multiple funds, how much risk is there in the funds reacting similarly (due to common thought processes), even if the actual holdings are different?
Does it make a difference whether they're similar funds? For example, I might not invest in both BCOIX (core plus) and BAGIX (aggregate bond), since they operate in similar though not identical spaces. Regardless of how much or little their portfolios overlap.
How about the Primecap team? Would one invest in, say both VPMCX (Primecap) and VPCCX (Primecap Core), which likewise operate in similar but not identical spaces? How about the Dodge and Cox team? You've got pairs of similar funds, such as DODFX (international) and DODWX (global). On the other hand, other pairs of funds, like DODFX and DODGX (US) invest in different markets. Would they have less (acceptable?) management risk because of that?
Regardless of how good the management team is, at what point does one not buy a second fund precisely because it is managed by a good team one already "owns"?
Comments
Regards,
Ted
https://www.forbes.com/forbes/2007/0129/080.html#3b6484781988
I hear a lot about owning multiple funds to dilute manager risk here at MFO. I'm not a proponent of doing that myself, but you likely don't dilute that perceived risk by duplicating within the fund family. Good point.
https://www.thestreet.com/story/880027/1/janus-extraordinary-1999-powered-by-small-group-of-favored-stocks.html
Rather, I'm simply concerned about the possibility of building a portfolio where managers of the various funds tend to use similar strategies (perhaps as a consequence of one's choice of selection criteria). Notice that Vanguard tends to pick management teams for multi-managed funds so that each each management team compliments the others.
A first step might be to avoid using the same team for multiple funds, or at least for multiple funds that have similar objectives. That doesn't mean that one must necessarily buy multiple funds with different management teams for a given space (e.g. US large cap).
Like so much with investing, it's where you choose to sit on a spectrum - here, the level of management diversification you want. I'm satisfied if my large cap fund, small cap fund, etc. don't seem to correlate too closely (due to similar strategies) despite being in different spaces.