As financial advisers, we must often scout for fund managers that we are most comfortable recommending to our clients. An important trait we look for in a fund manager is their ability to stick to their views and investment philosophy. This gives us confidence to know that these fund managers will not stray away from the reasons why we invested with them in the first place.
We will never advise our clients to invest their money with a fund manager that goes against their investment philosophy because the markets are no longer going their way and who feel the need to go against their views to boost their short-term performance. A simple example would be a value fund manager who buys growth stocks because value is no longer offering any “value”.
We advise our clients to invest their money with different fund managers with differing views and investment philosophies because we believe that they will stick to those views and over the long-term it will reap the rewards for our clients. This brings on the important point of “investing with fund managers with differing views”. It is important to understand that fund managers are never always right and do get things wrong from time to time. As financial advisers, we cannot know with certainty when each fund manager’s views will come through, which is why we believe it is best to blend fund managers with different views, investment philosophies and styles.
For example, one fund manager may be bullish on bonds, while another will be bullish on equities, or one fund manager will take a very conservative view on the market, while another will be quite optimistic. When two fund managers take completely opposing views, over the short term, chances are one will be right and the other wrong. As with the example above, from the last calendar year (2016) bonds were the strongest performing local asset class and equities the worst, whereas the year before (2015) equities outperformed bonds.
Therefore, as mentioned before, fund managers are never always right. While over the short term their views can be wrong, we can have some level of assurance that one of the other fund managers may have made the right call. It is important to understand though that fund managers take long-term views on the market and that whilst short-term views may not come through, we do expect them to come through over longer terms.
