POWERED BY MOMENTUM MEDIA
Assessing fund manager failures vital
Poorly performing investments can be as revealing as successes for assessing fund manager skill, according to Towers Watson Australia head of investment research Hugh Dougherty.
Assessing investment skill required a comprehensive understanding of the fund manager's investment philosophy, process, and execution of process, Dougherty said.
"It is important to recognise that mistakes are an inevitable consequence of taking risk where uncertainty exists, and the identification of these mistakes in a portfolio, in the context of broader understanding of an investment manager, can be very helpful in determining the presence of genuine skill," Dougherty said.
He said it was possible for a genuinely skilled manager to generate poor returns for an extended period of time due to their patience, a key characteristic of great investors according to Dougherty.
He said skilled managers understood that building long-term wealth required resisting the temptation to follow the excitement that builds around out-performing investments.
"Effective investors are equipped with the strength of personality to resist hyperbole and often invest in less popular areas.
"They do not conform to popular market strategy, and build teams of colleagues who will challenge their ideas and investment philosophies," he said.
He said detailed examination of investments within a portfolio and inconsistencies with processes and investments that contradict processes are all indicators of fund manager skill.
"Getting inside the minds and hearts of managers requires an understanding of the investment drivers and key issues for reaching investment decisions on selected investments," Dougherty said.
He said finding investment skill represented a material cost to most firms, but the benefits of choosing a skilled fund manager were worth the effort.
AUTHOR
Staff Writer
Money Management staff writers are writers who contribute to the website from time to time. If you would like to discuss the content contained within this article please contact us.
Recommended for you
New research has shown that investing in alternative assets and using active management has, to this point, delivered strong results for Australian super funds.
Australia’s $4 trillion superannuation industry is fundamentally reshaping the nation’s external accounts, setting the stage for a more sustainable current account surplus despite weaker commodity markets.
Rest has expanded its portfolio of renewable energy infrastructure by supporting a Victorian solar farm and battery project.
Economic growth was weaker than expected, once again highlighting an economy largely sustained by population growth and government spending.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
93.34 3 y p.a(%)
2
Global X GlobalX FANG+ ETF
36.96 3 y p.a(%)
3
GAM LSA Private Shares AU I
34.22 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
29.68 3 y p.a(%)
5
VanEck Video Gaming and eSports ETF (AU)
28.89 3 y p.a(%)
