Considering the strategy of an investment manager, which is essentially their investment approach and process, is a crucial element when assessing a fund manager, and one which is often underemphasised. While returns can and will fluctuate over time – and hence chasing past returns is a poor manager selection approach – an investment manager’s strategy should remain relatively stable and has the added benefit of being (relatively) easily assessed. This assessment provides a good way of differentiating between fund managers, understanding what they have to offer and whether this is aligned to your needs as an investor.
Financial products are becoming increasingly sophisticated and although good fund managers are of great potential benefit to investors, simply placing blind faith in a manager to do what they say they will, even if they have been successful in doing so in the past is fraught with danger. Instead, investors should take the time to understand a manager’s proposed investment process and whether they have confidence that it is (and will continue to be) diligently applied.