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When Portfolio Manager Change Can Be a Good Thing

Portfolio manager turnover often raises a red flag to investors, but sometimes can actually be a good thing, writes Morningstar analyst Janet Yang.  Although any change in management should prompt investors to dig deeper, Ms. Yang offers some examples where a change in portfolio manager can actually improve a fund’s prospects:

  • One Fund’s Pain is Another’s Gain.  “A manager's departure may justify a fund's downgrade, but that manager's appearance at a different fund may be a positive development there.”

  • Keeps Things Fresh.  Regular changes to team members can help keep viewpoints fresh.

  • Addition by Subtraction.  “Sometimes less is more, such as when a fund’s top-heavy team sheds some of its members.”