SMSF Investment Strategy – Fund Manager Selection

What is Fund Manager Selection?

Fund Manager and Fund Selection is the process by which Blueprint Wealth extensively reviews available data on different managed funds and their managers and makes recommendations to our investors.

Key Considerations

There are several facets to this approach which make it more than just an exercise in comparing historical returns.  After deciding your ideal asset allocation, selecting the correct fund and manager for your portfolio is the next critical step in building a high performing portfolio.  The first consideration is your platform.  We will select the appropriate investment platform to suit your circumstances, amount invested and feature requirements.  The universe of managers that we then analyse is that which is available under your platform.

Blueprint Wealth uses third party research from investment houses including Lonsec and van Eyk to gain an internal perspective on the workings of the fund and the manager.  To us, this is the most crucial element of fund research.  We look for funds that have a stable staff profile, highly experienced fund managers, well-resourced investment teams, a transparent investment process and sound risk management policy.  These qualities, when present, will increase the chances of the fund manager performing well consistently.

We are not looking for the fund manager who had one great year, but one who is best poised to perform well year after year.  In that respect, historical performance is certainly important, but we never consider just a single year’s performance as it could easily be due to luck or, perhaps, the manager taking on more risk than necessary.  Also, historical performance is only relevant if the same team and processes are in place to enable a repeat performance.  If the fund manager has experienced significant staff turnover or changes to policy and process, then we will watch their ongoing performance very closely.

After gaining an understanding of the fund manager, we then proceed to look deeper into the individual funds offered by that manager.  Although not always possible, we will look to employ more than a single manager for any asset class or use a multi-manager fund to diversify manager risk.  This is especially the case for asset classes with a high allocation in the portfolio.  We also consider the scope of the fund and how closely its stated investment policy matches our criteria e.g. when looking for a domestic bond fund, we will look to see if the fund in question is permitted to invest in foreign bonds, which if it is, could lead to an investment profile divergent from our ideal.

Other Factors

Other factors that are important include the longevity of the fund (how long has it had to work out any investment wrinkles), its size (is it too large or too small – each has potential risks), and the scope (is it highly constrained or flexible).  After evaluating all of these factors, we consider the fund ratings that have been given by the various research houses and understand what they see as particular pros or cons.  It is common to find funds in the market place that have little or no analyst coverage.  In the face of well-qualified suitable alternatives, we would be unlikely to recommend such a fund, because our insight into its operations is limited.

At Blueprint Wealth, we aim to ensure that the fund selection process is very transparent and that the resultant portfolio is flexible to the investor.  Transparency allows the investor to always understand why a particular fund has been selected and what it is designed to achieve in the portfolio.  Flexibility ensures that when portfolio changes are required, they can usually be done so with minor adjustments at low cost.

For more information on our fund manager and fund selection methodology, please contact Blueprint Wealth.

Greg Major, Director, Blueprint Wealth

Blueprint Planning Pty Ltd trading as Blueprint Wealth and Greg Major are Authorised Representatives of AMP Financial Planning Pty Limited.