What Are the Key Attributes for a Fund’s Success Beyond Investment Performance?

Investors today have access to a large pool of funds with various strategies and investment themes.

To select the right funds to invest in requires some due diligence about the funds themselves and also about their fund managers. 

Typically, investors will look at:

- A fund’s track record

- Risk level and volatility

- Size of the portfolio (size of the fund)

- Composition of the portfolio

- Historical performance vs a relevant index

- Management fees and performance fees

- Some additional quantitative measures (like maximum drawdown, etc.)

- Frequency of NAV publication and of subscriptions/redemptions

- Fund manager’s reputation

Seminars by the Author Demetris Nicolaou

1. 21/03/2023 - Sustainability Related Disclosures in the Financial Services Sector (SFDR)

2. 29/03/2023 - Chartered Financial Analyst (CFA) Certificate in Environmental, Social, Governance (ESG) Investing

3. 25/04/2023 - EIMF Certificate in Environmental, Social, Governance (ESG) Regulations, Requirements and Reporting

4. 23/05/2023 - CISI - International Introduction to Securities and Investment

Still, there are some additional questions to ask: 

“What are the main characteristics of a successful fund?”

Even though success may mean different things to different fund managers, still, some of the key ingredients of this “success” need to be identified.  These attributes may be common to a number of different funds regardless of their size and investment strategies.

The following practices seem to contribute positively to the success of funds:

- Growing strong relationships with investors

- Having transparency (with regards to fees, the optimal level of portfolio disclosures, etc.)

- Adapting to changing market conditions (e.g. changes in yields, new geopolitical risks, etc.)

- Retaining key persons and team continuity

- Investing in technology (to manage the portfolio, to provide access to investors, etc.)

- Adaptability and willingness to change

- Adopting strong investment values and ethical cultures

- Any ESG (Environmental, Social, Governance) criteria within the fund’s investment policy

 So, the answer lies not in a single magic formula but a combination of best practices and strategies that are adopted by the fund manager.  Over time it is important that this combination continues to evolve and change as well.