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Want A Fund With Good Returns? Get A Good Fund Manager
Advertorial | 07 March 2014
By: Louis Kent Lee
Articles (199) Profile

One of the most famous investment tenets of Warren Buffett, the investment sage in the market with consistent returns, is none other than that of management. Specifically, if you break it down the line, who is managing your company, or in this case when it relates to a fund, which fund manager is managing your fund?

Put across best by Morningstar, “The overall quality of a fund’s investment team is a significant key to a fund’s ability to deliver superior performance relative to its benchmark and peers”. This will definitely also call into consideration of things such as the manager’s track record on other funds managed, team stability, and also the manager’s alignment of interest.

This is one of the five pillars that runs the engine behind the research methodology of Morningstar.

Among common risks prevalent in the investment world that takes tons of technical knowledge and investment acumen to navigate, one of the stickiest risk that can erode your fund’s worth in just a matter of days, is none other than social political risks, or in other words, country risks.

A fund analyst I talked to from Morningstar, Arne Hilke, revealed that the extent of the performance of a particular fund, especially if it can be affected by social political issues, depends on the steering of a particular manager.

For instance, let’s take the Russia Ukraine drama we’ve seen recently. Say a particular fund you’re vested in has got some exposure in Russia. It is up to the manager, to actively ascertain and reallocate the country risk within the fund, determine a strategy to a) protect your fund, or b) re allocate the fund’s country’s allocation and profit from the volatility.

Their level of risk appetite and management of style will also come greatly into play, as it is likely that risk averse managers will use the strategy that minimises negative impact dealt to the fund in such situations, where more aggressive managers will be seek to profit from such volatility instead. Knowing the styles of how your fund managers to be manage their funds, based on past performance will be ever so important, as you should find one that suits your “investment style”.

Morningstar Fund Awards
As the performances of the many different funds out there are tracked, Morningstar will be holding its International Fund Awards program on the 13th of March to recognise funds and fund groups that have added the most value within the context of a relevant peer group for investors over the past year and over the longer-term.

Strict criteria and scoring methods are in place to ensure that although a fund’s one year performance is one of the emphasises, funds must also have delivered strong three-and five-year returns after adjusting the risk within the awards peer group. In addition, the fund must also have been at least in the top half of their respective peer groups in at least three of the past five calendar years.

With such iron clad barometers to track good performers in place, I look forward to find out which fund wins, and most importantly, understand why they won, and how I can leaf strategies which are applicable for my investing arsenal.

Louis is a qualified accountant with the ACCA, and is the Research Editor at Shares Investment magazine.

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