Wednesday, February 13, 2013

Are money managers worth their weight, or an unnecessary expense?

THERE have been many studies that look at whether the fund manager can deliver continuous performance above average. After all, it is the manager that you want to look after your money. Most studies indicate that consistent outperformance in recent years in a row is difficult to achieve, especially in developed markets where information accessibility level playing field. It can come from a number of factors. Perhaps the more luck at skill outperformance in the first place, perhaps changing market environment and a successful innovation strategy suitable for an ecological market, or manager may be less interested because they make more money. However, one can better case for using active managers in emerging markets less efficient, whereas the scope of the expert knowledge to affect a higher return. The implication of this is that the intelligent combination of active and passive managers should provide the most efficient risk cleanse. But is it really? At this point somewhat misguided: fantastic (we believe unique) we actually ask clients if they believe that the skills of industrial investment worth paying for - not often asked question in professional services. And there is no doubt that strong opinions are divided into active management. It is not our role to impose our opinion on the client: there are many ways to manage your money, and it is important that flexibility and build portfolios for their clients feel comfortable, do not push the lofty views it ... especially when it is substantially open to question. It is much better to give the clients investment portfolio they are comfortable with - it will help to reduce the bias behavior and make better investment decisions by rotation. For example, if I have low confidence in skills and then paying for active management can make me very stressed in a bad market, when I feel premium can be provided. On the other hand, if I have a high confidence in the skills of investors, I can feel just by paying for active management that I can protect myself from the market to some degree. Either, the more comfortable I am with my portfolio, the more I have to put it through the bad times. Obviously, talking in a low confidence in the skills of investors about active and passive mixed approach may present some challenges. They are more likely to see the manager as a source of underperformance rather than outperformance sources. For those who believe, of course, the effectiveness of manager selection and due diligence is important. Understanding your client's attitude will help build a portfolio that more accurately reflect the cost of the client is willing to pay. Important is a good transparent relationship building with clients and consultants should appreciate in the long term through times both positive and less profitable. Andrew Miller is regional headquarters :: Barclays Wealth in Newcastle

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