If you’re looking to invest, then it may be in your interest to employ a fund manager. Unless you have the time and energy to learn all about the market and how it works, then it often pays to employ someone to look after your funds and manage it for you.
A fund manager will be employed for their knowledge and experience in the industry, and will probably have more confidence than if you were to do it yourself.
Take a look at our fund manager selection guide to making sure that you’ve got someone who knows what they are doing.
–Don’t Go For the Big Name Brands
Traditionally, the big management suites offer the worst run funds. They don’t offer as much bespoke care, and they are often only successful because they have a big name to hide behind.
Instead, go for a smaller boutique or someone you’ve not heard of. They will usually only manage a few funds each, and will therefore be able to look after you as if you’re their only client. You want to be able to communicate and stay in touch with your manager as much as possible.
–Look at Past Performance
Of course, past performance is no guarantee of the future, but it will tell you about how the fund manager operates. Try to figure out their style of investment – do they take a lot of risks that don’t pay off?
Think about how this sits with you: how comfortable with the amount of risk that they are taking? Do your comprehensive research about fund managers out there and look out for successes in the past and what their clients talk about them.
–Look at their Portfolio
There are two main things to look at when it comes to a portfolio, the size and the turnover. The size is important, because you want a manager who takes high conviction positions in a number of preferred stocks, rather than one who seems unconfident and owns lots of companies.
Around 40, or perhaps less for smaller funds, is a good number. It’s diversified enough, but can be lifted with a few good performers. More than 40 and it’s hard to keep track and manage.
The portfolio turnover is an essential element to look at too. This is the number of companies bought and sold within a certain period of time, usually a year. Usually, you want this number to be low, at around 20 percent. However, if the fund’s strategy revolves around short holdings, then a higher percentage can be explained away.
–Look for Consistency
You should investigate anything that the manager has said to the media, or has had published, and look at whether it’s in line with the way they conduct their funds. Unless you’re looking for short holdings, you don’t want someone who is easily swayed, follows trends too closely or lacks the courage of their convictions. If you intend to invest greater percentage of your money, check out every detail and choose with conviction.
–Talk About Fees
Before you enter into any agreement or contract, you need to know how your fund manager will be paid and for how long. There are a variety of different ways that fund managers can be paid, so make sure you understand exactly how this particular engagement might work. Funds can also affect the money you make on your investments too.