How to better identify exceptional fund managers
The article focuses on the true attributes that determines investment success. Although many pundits are quick to discuss the merits of passive vs. active management, the discussion often misses valuable insights. Passive investment isn’t always the safe path for a better retirement. Passive investments alone do not protect investors from the downside risks associated with an overall market decline. Although we are currently in a bull market, investor sentiment can unexpectedly change for the worse. Performance during these down periods is critical to investment success.There are exceptions to every strategy. This includes strategies as highly praised as index investing. Although index investing does outperform actively managed funds in general, there are still exceptions to the rule. For example, holding the top five actively managed funds 40 years ago, would have outperformed the S&P 500.
To conclude, the discussion between actively managed funds versus passively managed funds has its merits. However, investors are missing two key filters that can identify exceptional fund managers. The two components that investors should truly focus on are low expenses and high management ownership. Funds that keep their fees relatively low while also maintaining a high degree of ownership, tend to outperform benchmark indexes on average.Timothy D. Armour is the chairman and chief executive officer of Capital Group.After graduating from Middlebury College with a bachelor’s degree in economics Timothy began his career at the capital group.
About Tim Armour’s Career he first participated in The Associates Program, later transitioning into an equity analyst position. In this capacity he was charged with covering global telecommunications and U.S. service companies. In 2015, Timothy helped orchestrate the strategic partnership between The Capital Group and Samsung Asset Management. With this partnership, both firms developed active investment strategies and solutions for Korean investors. Under the agreement, The Capital Group provided valuable active management know-how to enhance the overall client experience. Timothy has been very favorable of the partnership noting that the he intends to, co-design investment solutions to fulfil the savings, retirement and insurance-linked needs of Korean investors.”