An interesting read about the risks associated with the star manager approach to investments. It is undeniable that there are extremely talented individuals within the industry who are renowned for continually exceeding their fund's expected performance while hurdling through unstable and volatile markets.
As people, we take comfort in the fact that our money is under the control of a single decision-maker because this humanises the relatively faceless and concealed nature of investment management. However, it is perhaps unwise to forget that the success of funds with star managers is also the result of a very wide network of researchers, analysts, economists etc.
This echoes the strong link vs. weak link theory that sports can be placed into one of these categories. For instance, basketball is a strong link game as a basketball team is only as good as it's strongest player, hence why the majority of funds allocated to buying team members in the sport are spent on star players (i.e. LeBron James of the Los Angeles Lakers). While football, or soccer, is a weak link game as a football team is only as good as it's weakest player. Football teams rely more heavily on having strong players across the entire pitch in order to set up passes that will eventually lead to successful scoring. Therefore, in football, spending huge amounts of money on star players like Lionel Messi is pointless if the rest of the team is subpar.
While investment funds are not sports, the analogy is worth thinking about as there are huge risks associated with placing one's trust in a single individual. As the article states, star fund managers still have the potential to be poor decision makers, or can simply move to another firm. A team-based approach to decision-making for funds is still rare because this can slow down processes, however this style of investing can can help curb egos and reduces the overall risk to a fund.
"However, the big risk with a 'star' system is sustainability. Stars can lose their edge, retire, switch firms, or drift away from their stated philosophy."