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Go forth and become a fund manager

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Go forth and become a fund manager.

I wonder how many parents would consider fund management as a worthy career for their sons and daughters? I would, but then I’ve enjoyed being part of the fund management industry for nearly thirty years and seen its impact on people’s lives.

There is no doubt that investing has changed in the past three decades and will most likely be a completely different art (or is it a science?!) in future decades.

It used to be that being a good fund manager essentially involved beating a benchmark index by picking the good investments from the index and avoiding the bad.

You could identify the investment philosophy or style that most resonated with your own personality — a growth investor would look for investments that offered the best prospects for profit growth, and a value investor would look for investments that were cheaper, and therefore offered better value than the rest of the index.

You could decide how often you transacted — perhaps you were a buy and hold investor like Warren Buffett, buying shares in companies that you intended to own forever. Or you could attempt to time the market and get into investments before other investors discovered them, and sell before others sold and pushed the price down.

Investors would generally appreciate the skill and effort required of a stock picker and would seek out those who had a better-than-average track record of success.

But that was in the old days. As in all industries, the investment business has experienced significant change, and the rate of change is accelerating.

Much of the change relates to the investment industry itself — investment styles are now interchangeable with growth investments often behaving like value investments and vice versa; information and markets change so rapidly that owning anything forever is out of the question; and few fund managers have been able to achieve a better-than-average track record, so investors are unsure who to pick!

Significant change has also occurred in investors’ attitudes. Having a fund manager beat an index has become less important than the manager generating returns to beat the bank deposit rate. Today dividend yield is considered more important and appealing than capital growth. Investors want to have a greater say in the sort of investments their fund manager owns (eg. ethical and socially responsible businesses) yet at the same time, they like passive or index funds which offer no opportunity to choose particular industries or companies.

Our ageing population and the era of low interest rates and economic growth has led to another significant change — a focus on ‘decumulation’ rather than accumulation. That is, as many people are investing to ensure their funds last their lifetime and provide a retirement income, as those who are looking to accumulate assets and grow them as quickly as possible.

The one thing that hasn’t changed about fund management, and the reason that I would still recommend it as a career choice for my children, is that fund managers perform a vital function, and the number of people needing investment management services is going to keep growing as people live longer.

Investors don’t just need good stock-picking, or a choice of investment products; they need someone to hold their hand and make the right decisions for them, in good markets and bad, so they can achieve their financial goals. Clients need someone to anticipate changing trends and adjust accordingly, so that whatever happens next, their financial journey will continue as planned.

As you’ll read in the following pages, we’ve provided the stock-picking and the diversified range of investment products and we’ve made some good decisions to ensure our performance remains competitive. But most importantly, we’ve helped investors stay on course and reach their destination; that’s our primary function.

 

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