January 2024
The Power of Continuity: Co-Portfolio Management
Driven by their desire to be responsible stewards, the trustees’ commitment to shared responsibility and collaboration laid the foundation for the co-portfolio management model and succession planning MFS® has today.
The robust succession planning model MFS has today evolved from the early trustees’ approach to collaboration in decision making. They were driven by their desire to be responsible stewards, and their commitment to that shared responsibility laid the foundation for the collective expertise and mentorship intrinsic to the co-managed portfolios and succession planning now integrated across the entire firm.
When MFS’ trustees started managing Massachusetts Investors Trust (MIT) in 1924, they would gather in each other’s offices in Boston, scrutinizing and discussing securities for hours. They took their fiduciary responsibility seriously, picking investments for the portfolio as a team, each trustee having a vote, and the security that got the most support would be chosen for the portfolio.
This process started shifting in the 1960s, and there were periods through the 1980s when MIT was managed by a single individual. But the recognition that collaboration was critical to the formation of MIT and the firm itself led to a series of co-portfolio experiments in the 1990s in which MFS returned to the firm’s original, collaborative approach but adapted it to align with the growth and diversification of the firm’s modern platform.
A key catalyst for this change was Lisa Nurme, who joined the firm in 1987 as an analyst and then became portfolio manager of the MFS Equity Income Fund, now the MFS Value Fund, in 1995. In the late 1990s, Nurme was looking to take a sabbatical for three months. Because of the significant amount of time she’d be gone, she and her colleagues started considering bringing on a partner to manage the portfolio with her. But they weren’t looking to add someone for only three months. As Nurme put it, “This was a permanent partner. This was not somebody who was coming to mind the fund while I was gone and then leave.” They viewed this as an opportunity to move away from the individual manager approach back to a collaborative one.
By the time Nurme left for her sabbatical in 2002, she and her co-manager Steven Gorham had a successful process in place. Nurme remembers they were “basically in constant dialogue . . . there was a lot of collaboration,” and their different investment styles complemented each other, highlighting the intrinsic value of a co-management model: Diverse skills, thinking and methods lead to stronger investment decisions.
Co-management and succession planning are also a form of risk management, protecting clients by managing portfolios in alignment with their long-term interests and enabling them to feel more confident in MFS as a trusted and experienced partner.
At the same time these discussions started on the Value Fund, MIT returned to a co-portfolio management model, and the MFS Research Fund was also set up this way. Kevin Beatty, a former co-CIO of global equity and co-portfolio manager for MIT, stressed that the ability to work as part of a team — across the firm and around the globe — is the most critical factor. He noted that “the way we work with each other makes us better investors,” and co-management really means we’re “always thinking about the shareholder first.”
Implementing co-management for multiple funds in the 1990s was a critical step in developing MFS’ unique succession planning model. The firm takes the required time necessary to find the right co-manager for a given fund, usually through an exhaustive in-house search and selection process. MFS’ approach is designed to ensure continuity and preserve long-term relationships with clients while offsetting the unsettling nature of change that might occur when portfolio managers leave. As current MFS CEO Mike Roberge said: “We think that having two people challenging one another’s views is going to drive better outcomes for our clients. And the other is [that] people leave the organization at times for a variety of reasons, and it gives continuity to the client to know that there’s going to be someone in that portfolio that they know.”
This culture of collaboration, where everyone’s willing to discuss, challenge and refine ideas, is what leads to well-thought-out decisions and investments.
Co-management and succession planning are also a form of risk management, protecting clients by managing portfolios in alignment with their long-term interests and enabling them to feel more confident in MFS as a trusted and experienced partner.
While the players inevitably change over time, this approach helps ensure that the firm’s philosophy, research process and investment strategies remain steadfast — and that MFS will continue to be responsible stewards of capital and serve clients’ best interests for the next 100 years.
Please note: Not all of the funds included in this material may be available for sale in your country.