The five 'P's in the pod

Philosophy, process and people – the three Ps – are often considered the key determents of an asset manager’s success.

When choosing a fund manager we regard people as the most important.

But there are also other considerations.

Two more 'P's

Tamas Kulcsar, research analyst at Glacier, Sanlam’s vehicle for the affluent market, adds two additional 'P's: pay and performance.

As in earlier report he also regards performance as the area that can lead investors astray.

People are important because they make the decisions that affect investors’ wealth.

“As investors, we need to know who those people are. What qualifications do they have? Do they have any support? How are decisions made? Does the manager have full autonomy or is it a team-based approach?” Kulcsar said.

However, how the manager is incentivised should also be part of the selection process.

Should it be performance fees, shares in the management company or stock options? Each has potential advantages and disadvantages.

And when do you fire an investment manager?

“As a general rule, three consecutive years of underperformance should be a clear warning sign things are not well,” he said.

 “A manager leaving a fund is another warning sign.”

 - Finweek