Asset management firms, long centred on autonomous star managers, are now seeking to create deep team cultures by encouraging succession planning and compensation, according to a report by Moody’s.

The loss of a key individual or team can have a significant impact on a firm's business franchise, its brand and, eventually, its financial performance as evidenced by the recent losses of star managers at PIMCO and Waddell & Reed. 

Neil Woodford’s departure from Invesco Perpetual in 2014 also illustrates the reason firms are becoming aware of “key person risk.”

Moody’s already incorporates factors related to how firms manage key person risk into its ratings of asset managers, so it is unsurprising that many of Moody’s top rated firms already have systems in place to mitigate this risk.

Larger firms like BlackRock and Franklin Resources, both rated A1 by Moody’s, have begun working to deepen the bench by spreading knowledge more effectively between teams. 

Both of these firms have teams dedicated only to facilitating knowledge sharing across investment teams.

"The knowledge sharing initiatives, like those at BlackRock and Franklin, are examples of how firms are moving towards developing deeper benches of investment talent," said Ram Sri- Saravanapavaan an Associate Analyst at Moody's Investors Service.

Firms are also moving away from autonomous managers towards a team culture centred on repeatable processes. 

By choosing to prioritise proven investment processes and a deep team, a firm can reduce the impact of an individual manager leaving, while increasing its transparency to investors according to the report.