To minimize the risk when their managers leave (and keep clients from migrating, too), investment companies have become fond of teams. More than 70% of U.S. equity mutual funds were team-managed in 2010, up from roughly one-third in 1992 (according to an April 2012 working paper, To Group or Not to Group? Evidence from Mutual Funds, by McGill University's Saurin Patel and Sergei Sarkissian). The rising preference for team-managed strategies may be linked to Morningstar's ranking of portfolios according to style-small-cap versus large-cap equities, for instance. More advisors and investors are opting for greater control over asset allocation by selecting funds that track specific style betas.

Those trends spell waning tolerance for opportunistic strategies run by managers free to migrate across investment styles at a whim. Team products, such as those at American Funds or Primecap Management, where multiple managers each run a small portion of a fund's assets, show more consistency and stability, says Russ Kinnel, Morningstar's director of mutual fund research.

Whatever the motivation, the shift toward team-managed funds has implications for risk and return. Some researchers say team-managed funds are less likely to pursue extreme investment strategies than portfolios headed (or dominated) by one manager. In that case, it's reasonable to expect that single-manager funds are more likely to exhibit relatively extreme behavior. In fact, that's the message in one recent study of equity mutual funds (Is a Team Different From The Sum Of Its Parts? Evidence From Mutual Fund Managers, by Michaela Bar, Alexander Kempf and Stefan Ruenzi in the Review of Finance, April 2011). The authors have discovered that single managers tend to show up in the top or bottom of performance rankings (see Figure 2). And team-managed strategies are more likely to show up in the middle of performance percentiles.

Single-manager funds may not be a growth industry, but tenure is still a relevant factor if you're choosing portfolios under the influence of one name. A 1996 analysis in the Financial Services Review by Joseph Golec noted that "the most significant predictor of performance is the length of time a manager has managed his or her fund." A paper by Qiang Bu in the Journal of Index Investing reaffirms the point, concluding that "experience matters in improving fund performance, especially when the market is volatile." (Bu's paper is called, "Exposing Management Characteristics in Mutual Fund Performance," Spring 2012).

Details, Details...

If manager tenure is still connected with performance, it's only natural to ask: What influences tenure? One variable is corporate culture. Morningstar's Kinnel recently ranked the largest fund companies based on average manager tenure and retention rate, measuring the percentage of managers who have remained at their firms over the past five years. Kinnel says investors should think twice about investing in funds run by companies with low retention scores. "If those who know the company best are fleeing, you probably should not be buying," he wrote last year.

Among the largest firms, Kinnel ranks Dodge & Cox as the top fund company for manager tenure (using data through December 2011), while American Funds ranked first on manager retention last year. Both companies were also number one in these categories in 2010. (For a copy of the rankings, see "Quantitative Rankings of the Largest Fund Companies," January 12, 2012, at Morningstar.com.)

Corporate culture should also be a factor when investors weigh the pros and cons of a manager's departure. It's reasonable to assume that a lead manager's exit from a team-handled fund will be less disruptive than if he were leaving a fund he dominates. But generalities have limits. Ultimately, an investor has to assess the manager or team that's taking over.

That task is no different from choosing active managers generally. But there are extra twists and turns in the cases of talent turnover. The first question an investor must ask (and answer) is: Why is the manager leaving? If he is sick or dying, that's self-explanatory, but if he's retiring or taking another job or if he has been fired, it demands closer inspection. Was he really retiring? Did she really just want to step off the fast track to write a novel? Was he forced into retirement because he was losing his touch? If his performance had started to deteriorate, the news shouldn't come as a surprise. Fading glory is hard to hide when investors are continuously monitoring a fund.

Sometimes a company's internal conflicts spill out into the open and force quick choices. When Trust Company of the West fired Jeffrey Gundlach in December 2009, shareholders of his highly rated TCW Total Return Bond fund were pressed to consider the potential fallout.