How to pick a fund manager

Wednesday, 25 January 2006 12:00

Investors have been given valuable advice on how to pick a fund manager that will consistently beat the market.

John Chatfeild-Roberts, who runs one of the UK's top funds of funds, explains the secrets of avoiding poor performance and putting money in growth areas in his new book Fundology - The Secrets of Successful Fund Investing.

This jargon-free study explains how funds work, how to pick managers and how to avoid common investment mistakes.

"My problem with studies claiming to show that picking the best funds is virtually impossible to do, and that costs are all that matter, is that it flies in the face of common sense," Mr Chatfeild-Roberts said.

"How can it be that there are plenty of investors who lose money to the market consistently? Somebody has to be profiting at their expense."

The investment expert also criticises those who claim market trackers are the top option for investors.

"A passive index-tracking fund is almost guaranteed to do one thing and that is to underperform the index that it is trying to track by roughly the amount of its charges," he explained.

And while no guarantee of future performance - Mr Chatfeild-Roberts is adamant that past performance is important.

"The past performance of a fund manager can tell you quite a lot about how they might invest, and therefore can give you some guide as to what their performance might be like in the future."

The most important lesson, however, is that people are in charge of funds - and that statistical analysis can only take you so far.

"There are a few very good ones [fund managers] around, though not that many exceptional ones. Investment is an art not a science," Mr Chatfield-Roberts concluded.

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