Forget gurus and geeks … look for a guide as your asset manager

Gurus and geeks may have a role in the asset management industry, but retail investors are normally best served by an accessible guide who maps the way forward in an easy-to-follow fashion.

The industry heads-up comes from Imara Asset Management, South Africa, a fund management and financial advisory business that serves a wide range of investors, from the ultra-wealthy to the average salary-earner.

Says MD Lara Warburton: “Good communicators often make for good guides and good strategists.

“You can’t measure strategy if you don’t understand it. You will only be confused by the ‘guru’ who uses industry jargon you can’t always follow. The guru might be among the first to spot a trend, but it just might be a fad and fads don’t last. Even well established trends go into reverse at some stage.”

The investment ‘geek’ or technocrat can also confuse the relative newcomer to investing. These highly qualified professionals favour complex predictive modelling and sophisticated methodology.

“You can easily be awed by all the science, making it difficult to pluck up the courage to ask hard questions,” says Warburton.

“Remember, the market jargon, models and methodologies didn’t help on the run-up to the global financial crisis. But investors who stuck with strategies they understood and trusted are not doing too badly today.”

She says good ‘guides’ identify themselves by their accessibility, jargon-free information, open communication and eagerness to explain their investment philosophy.

“Don’t be afraid to ask questions,” says Warburton. “Ask managers how they plan to make money and forget mumbo jumbo about yield curve dynamics. Always ask about costs.

“Find out how often they communicate. Regular information is essential.”

Retail investors should also ask what managers believe in.

“We believe in quality companies, trading at reasonable valuations with good opportunities for growth,” says Warburton.“We like firms that pay dividends, especially for income clients.

“We believe in diversification and the long term, but see no point in sticking with asset classes that will be punished by an imminent turn in the market cycle.

“We’re happy to share these views with clients.”

Warburton says emphasis on past performance is not, in itself, misleading, but can create false expectations.

“Relying on past performance is like driving strategy through the rear-view mirror,” she notes. “There are several industry ranking tables. They use different methodologies and this is not always understood by retail investors.

“Industry awards can be another indicator, but they always hark back to last year. Furthermore, award and category criteria can be stacked against some while favouring others.

“Often, it’s better to focus on philosophy, communication and your comfort fit with a strategy you fully understand.”