The past few years have shown that even a liquid and high-performing fund, managed by a trusted brand-name institutional firm, can fall foul of a liquidity crisis and the resulting redemptions by spooked and cash-hungry investors.
The JP Morgan team (from left): Blake Crawford, John Baker, Jonathan Ingram and Anis Lahlou-Abid
The JP Morgan Europe Dynamic Long Short Fund is a case in point. The fund was making annualised returns of 24% in the run-up to the financial crisis, and arguably did not deserve to see the majority of its assets redeemed by investors who were locked in elsewhere.
But the departure of lead manager Ajay Gambhir in early 2007, combined with the firm’s decision not to impose gates then and in the subsequent 2008 market meltdown, saw assets drop to one sixth of their peak.
Since then, the fund has continued to make impressive gains for its remaining...