I often attend industry events where fund managers get to pitch their ‘latest funds’ and I have noticed the common dominator.
The fund manager/group has found what they consider a better way of managing funds than they did in the past and they have come up with something they think is very different from what the rest of their peers are doing.
This might be a new way to target risk within the portfolio or capture income using certain asset classes, but to my mind the real question is why aren’t they putting these ‘new ideas’ into running their existing funds?
This becomes ever more pertinent where the manager has existing funds that are lagging behind its contemporaries. Shouldn’t they concentrate their efforts on sorting out their existing funds, rather than launching new ones? With no track record for a new fund, all advisers can really go on is the manager’s promises to deliver, and perhaps their track record. Of course, advisory firms that have a rigorous investment process will already have screened out these new funds.
I doubt that would stop the frenzied spate of fund launches, though. So should advisers shun new funds? If no-one’s buying them, sooner or later they will be closed down or merged and fund groups will learn their lesson.
The fact of the matter is we need fund managers to sort out their existing under-performing funds, not launch new ones.
Abraham Okusanya is the principal at FinalytiQ