Removing A Manager is About More Than Just Performance 

Next week, family office leaders will be gathering at the East Coast Family Office Wealth Conference, held May 11–13 at the Ritz‑Carlton in Fort Lauderdale. 

Looking through the agenda, it is clear the event will be another unmissable few days of family office content. Let me know if you want details about attending last minute and I can point you in the right direction. There is limited space available.

One closed‑door session addresses one of the most difficult questions allocators face: when is it time to cut off a fund manager — and how should that decision be made?

Officium spoke to Kenan Jiang, CIO of Denver based SFO Sterry Capital, and the session’s moderator, about the nuance behind this decision for family offices.

The most common problem, Jiang said, is straightforward: when managers are underperforming it may be time to part ways, particularly if they can’t explain why they keep losing. Another reason to cut ties is when fees no longer justify the excess returns a manager delivers and similar exposure can be found elsewhere at lower cost. The problem may reflect a manager straying from their investing style or a personnel or ownership change at the firm.

For Jiang, decisions become complicated when relationships turn personal. Institutional allocators generally have a formal process to choose managers, while family offices sometimes hire managers based on relationships with principals and decision‑makers. That dynamic can politicize any decision to remove a manager.

CIOs who want to recommend cutting ties, despite the difficulty, should build a case based on objective criteria. This way the decision will be rules-based and not personal.

Family offices that ultimately decide against firing these managers “need to understand that it was their decision and they can’t then blame someone else for under-performance or if anything else happens,” said Jiang.

Some managers hold up better than others across market conditions. The harder task is knowing how to identify issues early and when to act on them.