Top tips for picking a fund manager

Quantitative or qualitative research, or a combination of the two? Maria Merricks discovers the best way to decide who controls the destiny of your clients’ money.

Investor confidence has plummeted over the last few months and it has never been more important for advisers to ensure the right fund manager is in control of their clients’ money.

But with hundreds of funds on the market, advisers would be forgiven for wondering where to start.

In the run up to RDR, getting this decision right is increasingly important. As many firms choose to keep their investment decisions in house, more and more emphasis is being put on the issue of adding value.

The question is, then, how do you make sure you get it right?

For Tim Cockerill, head of research at Rowan Dartington, the vast universe of managers means it is important to adopt a robust and repeatable framework. This will ensure the questions asked and the data gathered is all the same, making comparisons easier and more meaningful and reducing the risk of surprises.

Quantitative research

Such information should come from two avenues: quantitative and qualitative research, according to Matthew Phillips, investment director at Broadstone.

Phillips suggests beginning with quantitative analysis as a screening process, using past performance as the ultimate filter.

“Even though the FSA highlights that past performance is not necessarily a guide to the future, it is a fairly good indicator to someone who is going to perform well over the next few years,” he says.

A manager’s reputation and experience is another factor to look at. The definition of experience, however, tends to vary from commentator to commentator. While Phillips says he looks for a track record of at least three years, head of multi-asset investment at Rathbones, David Coombs’ portfolio, typically consists of managers with experience of ten years or more.

“That may sound ageist but it is important,” says Coombs. “You do get super-cycles. When there has been a six year bull market, for example, it is interesting to see how a manager performed in a recessionary environment.”

Qualitative research

For Ayesha Akbar, portfolio manager of the Fidelity MultiManager Growth fund, past performance figures are all very well but it is crucial to understand where those returns have come from. This is where a qualitative assessment comes in.