Harbour Managers switch up duties, create much needed succession plan
Over the years, one portfolio management team that has consistently been at or near the top of our list of favourites has been the group at Harbour Global Advisors. Formed in 1997 by Gerry Coleman and Stephen Jenkins, Harbour managed funds tend to be low turnover, high conviction portfolios made up of high quality, best of breed companies that over the long term deliver strong risk adjusted returns with below average levels of volatility. Investors and advisors alike seem to love the Harbour Funds, which as of September 30 had more than $14 billion in assets under management.
Recently, it was announced that Stephen Jenkins, at the request of Gerry Coleman, was being promoted to Co-Chief Investment Officer of Harbour Global Advisors. In this role, Mr. Jenkins will take over the day to day operations of managing the Harbour team, while Mr. Coleman returns to managing money on a full time basis.
Another change that is coming is that the two will switch portfolio management duties. Historically, Mr. Coleman was the manager of the Canadian focused funds with Mr. Jenkins acting as his backup, while Mr. Jenkins was lead on the global funds with Mr. Coleman as backup. These duties will now be flipped with Mr. Jenkins taking the helm of the Canadian funds and Mr. Coleman taking over the global funds. It was also disclosed that both Mr. Jenkins and Mr. Coleman have signed multiyear deals to stay with Harbour and CI.
Upon review, we are neutral to slightly positive on this plan. Perhaps the biggest benefit to come out of it is that there is now a well defined succession plan in place for the Harbour funds once Gerry Coleman finally steps down. While he has stated that he has no plans or any intention to retire, the fact is that one day he will. By having Mr. Jenkins in place and Mr. Coleman remaining part of the team, additional continuity is assured. It also buys some time to allow for the internal development of a couple of other team members, specifically, Aleksy Wojcik and Phil D’Iorio, the lead analysts and managers of the CI Harbour Voyageur Corporate Class Fund who will likely be groomed to take on bigger roles within the organization.
From an investment management standpoint, there are not expected to be any major changes within the funds. In both cases, each manager is very familiar with the companies in the respective portfolios. There will be no changes to the investment process that is employed. It will remain a very value focused, team oriented approach where the lead portfolios are supported by their backup and the team of five analysts.
There may be some small changes around the edges of the portfolios, but they are expected to be minor and done on a very gradual basis. For example, Mr. Jenkins is a more value focused investor while it is not uncommon for Mr. Coleman to pay up for higher quality companies where he feels it warranted. Another potential change we may see is that Mr. Coleman may add some mid cap names into the global funds where compelling opportunities exist. Given the size of the Canadian market, it was very difficult for him to do this with the CI Harbour Fund. Combined, these two factors may result in a slightly more conservative stance in the Canadian funds and a slightly more aggressive positioning in the global funds.
Perhaps our biggest concern about this move is that the additional administrative duties may take away from Stephen Jenkins’ ability to continue to manage stocks in the way in which he has become accustomed. There is a good team that is in place, so while this is a concern, we believe that it will be of minimal impact once he settles into the new responsibilities.
Bottom Line: Portfolio manager changes are never easy and this is really no exception. Our expectation is that there will not be any meaningful changes to the funds and investors can expect to see comparable types of risk adjusted and relative returns going forward. As with all funds on our recommended list, we will continue to follow this situation closely for any signs of erosion in the expected risk reward profiles.