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A Fin24 user asks:
I have a handful of fund fact sheets with historic
performance statistics by various asset managers. Is performance history really
the best measure of a good asset manager?
Heather Robertson, a Johannesburg-based financial consultant with Blink Consulting, responds:
Yes and no. “Yes” because it is important that the asset
manager you select has a track record of consistently good returns; after all,
a fund manager can say all the right things but if the performance is not
there, then they are just empty promises.
For several reasons, the answer can also be “no”. Past
performance is not necessarily an indicator of future performance.
The
management approach to the particular fund may have changed. And a certain
amount of luck may have played a role in historical performance.
Some important aspects to look at when choosing an asset
manager include:
Management style
Understand how the fund manager makes the
investment decisions he does. Is he a
value manager (buying into shares when they are selling below their real
value)?
Is he a growth manager (looking
for shares with a chance of significant capital gains)? Does the fund have a
fixed or flexible mandate (can the fund manager reduce/increase exposure to
certain asset classes)?
Reputation and experience
To avoid being caught in an
investment scam, choose a fund manager with a sound reputation and avoid
promises that seem too good to be true.
Personal risk profile
How consistent is asset allocation with your personal risk
profile? You need to ensure that the fund you select does not expose you to
more risk than what is appropriate for your investment goal.
Management and performance fees
What are the
benchmarks - is the fund expensive compared to its peers?
Research capacity
Does the asset manager have access to
in-depth research about the companies and markets they are investing in?
Big or small calls
A fund manager may risk diluting
possible returns by diversifying too much.
It may be more worthwhile to select fund managers who have a track
record for making a big call on the right share.
- Fin24
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