Since the global financial crisis, the demands made by investors of financial planners have shifted, from simply wanting the maximum investment return to demanding more clearly articulated outcomes. This in turn is leading to changing demands on fund managers – and the traditional labels attached to managers are becoming less relevant than the actual objectives the manager pursues.
While traditional equity-management style labels remain applicable, a Professional Planner forum, held in conjunction with AMP Capital, has heard that a manager’s investment objective may be the more important thing to understand – and its style simply describes the route by which it gets there.
The investment objective of a fund manager is achieved by following a particular process, then financial planners need to understand whether a stated process is likely to achieve the stated objectives, and then whether those objectives are suitable for a particular client.
An investment objective clearly stated and supported by historical performance is an important issue, when one considers that there are well over 400 different Australian equity fund strategies that an investor potentially can choose from. This is a real issue in an equity market as concentrated as Australia’s is.
A fund manager may express a clear objective, and possess a clearly defined investment process, but it seems to be these two factors that then lead to a determination of its style, rather than a manager adopting a particular pre-defined style, adapting a process to fit that style and then claiming as its objective the result of those two factors.
The Professional Planner/AMP Capital Forum featured Matt Olsen, head of manager research at van Eyk Research; Paul Chin, senior investment analyst at Vanguard Investments; Scott Bennett, portfolio manager at Russell Investments; Don Hamson, managing director of Plato Investment Management; John McIlroy, executive director of Crystal Wealth Partners; Tim Murphy, co-head of fund research at Morningstar; Michael Price, co-head of fundamental Australian equities at AMP Capital; and Luke Rathborne, director of Fortitude Private Wealth.
The full version of this article was originally published in the May 2013 edition of Professional Planner.
