As a financial industry professional, you have probably already heard me discuss how the market has evolved and how the range of financial products has grown exponentially—and continues to do so. This change has been defined by innovation, new opportunities and the diversity of options. But have you ever wondered how the best investment funds are chosen in such a crowded market? If not, I encourage you to keep reading and discover why all that glitters is not gold. At this point, I can tell you that this is where the role of the fund selector comes into play.
The mission of a selector—the “Sherlock Holmes” of investment funds—is to uncover the winners. Selectors have to find a way to distinguish the top performers from the mediocre funds, something that demands substantial time and resources to thoroughly research all the options. The first step is a quantitative analysis that lets us identify the funds that are performing well and that is also consistent over time. Assessing a fund’s risk and robustness is essential to safeguarding investors’ capital.
Next, the qualitative aspects, including the style, methodology and investment policy, are examined. This detective work provides us a clear and detailed understanding of both the fund and its management team. It also necessitates building relationships with fund managers and other industry players, a crucial step for gaining first-hand insights with the highest level of reliability and detail.
This relationship becomes critically important not only during the selection process but also in the final, equally vital step—continuous monitoring. Once funds have been selected and made available to our teams, it is essential to track all key aspects, both quantitative and qualitative, to ensure they continue to meet the established objectives. This helps minimise potential risks not inherent to the market, controversies due to malpractice, a departure of the management team or changes in the investment process.
A demanding task, certainly not without its difficulties! As if identifying the best among more than 80,000 investment funds domiciled in Europe weren’t challenging enough, selectors face another significant hurdle: meeting the diverse needs of different management teams. The requirements of a financial adviser are not the same as those of an institutional investor, just as the needs of a domestic client differ from those of an international one. Balancing and meeting the specific needs of different regions and clients at a group level can at times feel overwhelming. However, it is just as crucial to select the best product within its category as it is to have a clear understanding of our objectives.
Today, we rely on a variety of tools, the latest of which is artificial intelligence. This technology has the potential to redefine and streamline data analysis, both for fund selection and continuous monitoring. Adapting to these technologies while maintaining human judgement is a key challenge that we will undoubtedly need to address.
Ultimately, investment fund selectors play a pivotal role in the financial sector, acting as a bridge between investors and the vast array of investment options available. Despite facing numerous challenges, their expert insight and analytical skills are essential in guiding investors towards more informed and strategic decisions. I have no doubt that the role of the fund selector will continue to be indispensable in the quest for the perfect fund in an increasingly complex financial landscape.
Diari d’Andorra 11.12.2024