End of the star manager? Wealth managers respond to Alan Miller

A more unlikely character to experience a Damascene conversion towards passive investment would have been hard to find. Alan Miller, formerly the chief investment officer at New Star Asset Management and for a time the ultimate star manager, announced this week that he has given up on the stars.

But have wealth managers experienced a similar conversion in the wake of a credit crunch which has demonstrated the benefits of a team-based approach that focuses on getting the big calls right?

Research conducted by consultancy group Scorpio has recently shown that 50% of wealth managers do not believe star managers can add value, with another 30% indifferent to the value they add.

Wealth managers themselves confessed it was natural to hang a compelling story on a personality and admitted to retaining respect for some of the original guiding lights of the star culture, which has dominated investment in recent years.

Wilf Blake of Charles Stanley in Bristol acknowledged that Miller’s reaction probably in part comes because of his bruising experience with the failure of New Star and the repercussions of his own fall as a star manager.

‘Managers are only as strong as the structures and processes they have behind them. I don’t think that anything like what happened at New Star would happen at Invesco Perpetual for instance, because they have such a strong team of extremely bright people working behind them. You are only as good as your weakest link,’ he said.

Edward Allen of Thurleigh Investment Managers said the company had recently moved offices and he had been reviewing much of the material which had been up for discussion in the early years of the century.

Among the heavily leveraged products that were pitched and rejected, the noticeable trend had been towards flawed ideas being concealed behind an individual with a strong track record.

He was also dubious about attributing too much power to an individual; whether this was in terms of narrow asset management or in terms of how you manage a business.

He said: ‘We had Madoff pitch to us and he had this consistent track record but once you began looking into it, it was all about the individual and nothing about the process.