It's never a good sign when your star fund manager quits suddenly. Especially when he's one of the rising stars of Wall Street -- and when he vanishes overnight, without a trace or an explanation.
Which makes the sudden departure of Charles De Vaulx from First Eagle funds this week as astonishing as it is mysterious.
A week ago, 45-year old De Vaulx was lead manager of First Eagle's
Gold (SGGDX) and
U.S. Value (FEVAX) funds. He had only taken over full control from his predecessor, the legendary Jean-Marie Eveillard, two years ago.
Now he's gone -- so suddenly that his employers didn't even have a replacement lined up. New York investment partnership Arnhold and S. Bleichroeder Advisers, which runs the First Eagle funds, had to bring 67-year-old Eveillard out of retirement to take the helm again.
The whole deal was a weekend turnaround. "Charles tendered his resignation on Friday, and it was accepted," says CEO John Arnhold. "He was not pushed. He was not asked to resign." The news was announced on Monday. The company would say only that the reasons were "personal."
Speculation centered on the possibility that De Vaulx had walked to join a hedge fund. But Arnhold suggested his contract would pose a problem for any potential employer. De Vaulx was only two years into a five-year deal at Bleichroeder that will limit his ability to work for any competing firm until 2010. "As I understand the contract, that would be the case," Arnhold says.
Is De Vaulx, who is French, staying in the country? "I have no idea if he's staying here," Arnhold says.
(As an aside: I could only find one Charles De Vaulx listed in a U.S. phone book anywhere in the country. That number was in Larchmont, a tony suburb of New York. It has been disconnected.)
It's more turmoil than you would expect from a fund that only had one manager change -- from Eveillard to De Vaulx -- in 27 years.
But then it's probably a little more excitement than First Eagle generally likes. The funds are known for little portfolio turnover and solid value management. They have been so successful that most have been closed to new investors, even though they have had little marketing.
That's largely thanks to Eveillard's terrific long-term record. His legend was confirmed in 1999 to 2000 when he refused to jump onto the technology bandwagon. At the height of the bubble, he lost so many investors that First Eagle's parent company at the time, France's Societe Generale, was happy to sell the company cheaply to Bleichroeder.
De Vaulx's departure suddenly reopens the question of who can fill his shoes. "Jean-Marie Eveillard has made it clear that this is only going to be a temporary transition," says Larry Glazer, portfolio manager at Mayflower Advisers in Boston and a long-term First Eagle watcher. "He's not going to be another Marty Whitman, and the question is who will take over after him."
Whitman, the legendary manager of
Third Avenue Value (TAVFX), is in his 80s and still going strong.
Arnhold says his company has a deep bench of senior analysts and that Eveillard's role will be to ensure the smooth transition to the next generation of managers. There's little doubt the Street will be watching closely to see who emerges as his successor.
For investors, this will matter. First Eagle funds have a devoted following. But as Glazer says: "When managers leave, you have to forget the track record. The fund is only as good as the current manager."
In keeping with TSC's editorial policy, Brett Arends doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Arends takes a critical look inside mutual funds and the personal finance industry in a twice-weekly column that ranges from investment advice for the general reader to the industry's latest scoop. Prior to joining TheStreet.com in 2006, he worked for more than two years at the Boston Herald, where he revived the paper's well-known 'On State Street' finance column and was part of a team that won two SABEW awards in 2005. He had previously written for the Daily Telegraph and Daily Mail newspapers in London, the magazine Private Eye, and for Global Agenda, the official magazine of the World Economic Summit in Davos, Switzerland. Arends has also written a book on sports 'futures' betting.