First Eagle today spelled out its succession plans following Jean-Marie Eveillard's (second) retirement from First Eagle Global SGENX and First Eagle Overseas SGOVX funds. A big part of that plan is new hire and portfolio manager Matt McLennan.

Who?

Of course, we didn't expect anyone famous. The pool of value investors with similar styles to Jean-Marie Eveillard is quite small, and even Eveillard remarked at Morningstar's recent investment conference at the end of June that he had no intentions of "poaching" from his value-oriented friends' shops.

McLennan, though, is perhaps a bit more obscure than expected. Don't get us wrong--he is credentialed. He's been with Goldman Sachs GS since 1994, including time as a small- and mid-cap portfolio manager and more recently as a global-value portfolio manager for Goldman's private wealth management clients. But he's been working in London for most of his career, and we haven't been able to find a public performance record by which to gauge his experience. In fact, we haven't been able to find much about him at all besides what was in First Eagle's press release, except that he's been a managing director at Goldman since 2002.

There are some encouraging signs for First Eagle fund shareholders--the biggest of which is that Eveillard himself was involved in the interviewing and hiring process. And First Eagle did take its time in finding a replacement. Finally, while the firm did suffer a big loss of research and portfolio-management talent when Eveillard's first successor, Charles de Vaulx, and others left the firm, other analysts have remained, and the team is currently adequately staffed. Abhay Deshpande, who worked with Eveillard on the funds in the late 1990s and early 2000s, will serve as comanager on First Eagle Overseas and assist on the other funds.

But there are many more questions. McLennan starts with First Eagle on Sept. 8, 2008, and it's unlikely we'll be able to speak with him until then. (He is currently bound by a non-compete clause.) Following are just some of our questions:

• How do you think your and the funds' strategies are most similar? How do they differ?
• What is your experience with fixed income, gold, shareholder activism, and Japan?
• What role does cash play in your strategy?
• What do you think of the current portfolio? What changes will you make, if any?
• Are there pieces of the portfolio or strategy where you feel you need to get quickly up to speed?
• What's your take on the financial sector? The energy sector? How do you see the portfolio changing, if at all, in those two areas?
• First Eagle has focused more energy on Asia recently. Do you think that's a good move? What has been your experience with Asian securities?
• What are your performance goals for the fund?
• Could you share with us your previous performance record? How did your accounts behave during times of stress? In happier times?

Even with these questions answered, it will be tough to assign the high degree of confidence we have in Eveillard to McLennan (or Deshpande, or just about anyone else). But the answers will help us set appropriate expectations for the fund. What questions do you have?

An excellent set of questions, Bridget. As an investor in both SGOVX and SGGDX, I have another question, though not directly for Mr. McLennan: where does this announcement leave Prof. Bruce Greenwald, who joined the management firm Arnhold & S. Bleichroeder as director of research after the departure of Charles de Lardemelle last September? One would hope that he will not exit through the revolving door that has become so popular with this firm's managers and research directors... -- JimH

Regardless of what the fund company says, First Eagle's management, including Greenwald and Eveillard, need to position the transition, post information on why they selected him, what makes him the "one", etc...lest they suffer massive fund redemptions.  We have been patient during this stressful period but there are alternatives, and smart money does not wait around too long to be convinced otherwise.

 

Joe Gordon

Good questions, all, Bridget.  Unfortunately, the reality is that Jean-Marie Eveillard is a rare and unique individual.  It has been a delight to follow his thinking and discipline over these many years, and a priviledge to be a shareholder.  Few individuals are able to protect and grow their shareholder's capital as Mr. Eveillard has.  I wish Mr. McLennan all the best, and out of perhaps misplaced loyalty, or just hope, I will hold on to my current holdings.  However, new funds will probably not be forthcoming until, over time, Bridget's questions are answered.  Mr. Evieillard, in case any of these blogs come to your attention, my deepest thanks for a job very well done.

JW