Morningstar view: Learning from 2011
I suspect most fund investors would rather be done, and quickly, with 2011.
Instead, investors and their advisers would do well to buy funds based on a thorough understanding of the manager’s approach and the resulting biases that are inherent in the portfolio. They also need to ascertain how this will play out in a portfolio context – if, for example, a client already has a consumer defensives-heavy portfolio, adding the likes of one of Neil Woodford’s funds to it may make no sense and result in large risks. Conversely, placing a fund such as Sanjeev Shah’s in a portfolio that is benchmark-like or growth leaning (as opposed to contrarian) could help add diversification.
It should be clear that advisers cannot do this sort of analysis properly without access to complete portfolio holdings and accurate aggregate risk exposures based on these holdings. It’s all very well for the FSA to expect more of advisers, and we applaud their efforts, but they need to help ensure advisers have ready access to the information required to do their jobs. Currently, the twice a year mandated disclosure falls far short.
Christopher Traulsen is director of fund research for Europe and Asia at Morningstar