As an investor into managed funds, you place significant importance and trust in your fund manager of choice. A fund manager is responsible for the buying and selling of the financial assets, such as shares, bonds, commodities, and currencies within the fund.
They are also responsible for the implementation of the chosen investment strategy of the fund and usually supervise a team of analysists who perform research on investments current and potential and make recommendations for the fund.
Unlike investment in a single asset – such as a share in a company that is exposed to market risk, volatility at an internal company, market, industry and macro-economic level – a managed fund under the guidance of a fund manager has a range of assets within the fund to guard against these sorts of risks.
Depending on the skill level of the fund manager – and the team of analysts below them – market risks and volatility can be negated through a range of trading activities made within the risk tolerance and the strategy outlined in the prospectus of the fund.
This effective management can see huge windfalls in terms of profit or management of losses as markets move. This is largely achieved by the fund managers through effective management of the risk levels of the assets within the fund, hedging using derivatives and of course buying and selling at the right time.
As an individual investor, you don’t have the access to the resources, knowledge, capabilities, team or time to apply to your portfolio as a fund manager has – it is the fund manager’s job after all.
A fund manager essentially allows investors to become ‘passive’, as multiple investors pool their investments into the fund, they lose control of it and put it hands of the fund manager.
Nothing speaks volumes in terms of performance like how the fund manager has performed and is currently performing for its clients under management.
Although nearly all financial literature and product disclosure statements rightly say, past performance should not be an indication of future performance, it does provide you with a benchmark and a gauge of the sort of fund manager you are dealing with.
A fund manager should come recommended by a credible and reliable source, who is qualified and licenced. Their knowledge of the market, ability to convey the strategy of the fund, management of how your money will form part of the investment, accountability and transparency should form part of your information source for a good fund manager.
For example, a manager who sends daily or bi-weekly updates on the trades made, the profit/loss of the fund, the positions and the strategy moving forward or provides a live online portal outlining the same information will provide a great deal of transparency and accountability for you to base your decisions from.
A good fund manager can make your investing simple to manage, however, it is putting your money in someone else’s care, so it really comes down to what suits your personal financial circumstances. To find out more do your research and always ensure you choose a fund manager with a reputation and history of investor management and success.
For the full breakdown on managed funds check out our article: The essential Information you need when looking to invest in managed funds.
We welcome you to give our team a call to discuss your investment goals and objectives.
You can call Walker Capital Australia on +61 2 8076 2210, and we’ll see how we can help you achieve your investment goals.