Manager Tenure

Lesson

Manager tenure refers to the length of time an investment manager has been managing a specific investment fund.

Practice Question #1

Which of the following best describes manager tenure?

A) The length of time an investment manager has been managing a specific investment fund.

B) The annual fee charged by an investment fund.

C) A measure of an investment's sensitivity to market movements.

D) The practice of spreading investments across a variety of assets to reduce risk.

Select an option above to see an explanation here.

A) Manager tenure refers to the time an investment manager has managed a specific fund. B) The annual fee charged by an investment fund is known as the expense ratio. C) A measure of an investment's sensitivity to market movements is known as beta. D) The practice of spreading investments across various assets to reduce risk is called diversification.

Terms

Manager Tenure:: The length of time an investment manager has been managing a specific investment fund.

Practice Question #2

Why is manager tenure an important factor to consider when evaluating a pooled investment?

A) It indicates the fund's expense ratio.

B) It provides insight into the manager's experience, stability, and ability to navigate various market conditions.

C) It measures the fund's risk-adjusted performance.

D) It determines the fund's sensitivity to market movements.

Select an option above to see an explanation here.

A) Manager tenure does not indicate the fund's expense ratio. B) Manager tenure provides insight into the manager's experience, stability, and ability to navigate various market conditions. C) Manager tenure does not measure the fund's risk-adjusted performance. D) Manager tenure does not determine the fund's sensitivity to market movements.

Historical Example

In the early 2000s, a well-known investment manager with a long tenure retired, and a new manager with a shorter tenure took over the fund. The new manager's lack of experience led to a period of underperformance for the fund, causing many investors to withdraw their assets. This example highlights the importance of considering manager tenure when evaluating a pooled investment.

Practice Question #3

Which of the following is NOT a factor that may be influenced by a manager's tenure?

A) Performance

B) Stability

C) Expense ratio

D) Experience

Select an option above to see an explanation here.

A) A manager's tenure may influence performance, as more experienced managers may have a better track record. B) A manager's tenure may influence stability, as more experienced managers may be better able to manage risk. C) A manager's tenure does not influence the expense ratio, as it is a separate fee charged by the investment fund. D) Experience directly relates to a manager's tenure, as a longer tenure indicates more experience managing investments.

Real-World Example

An investor is considering investing in two different mutual funds. Fund A has a manager with a 10-year tenure and a strong track record, while Fund B has a manager with a 2-year tenure and a less impressive track record. The investor may invest in Fund A, as the longer manager tenure suggests greater experience and stability.