5 Traits of Successful Asset Managers

Mutual funds are run by fund managers who follow the investment style and strategy outlined by their asset management companies or asset managers. The strategy outlined by the asset managers and its successful implementation is what determines the performance of a mutual fund investment.  Let us find out more about their role and the five important traits that contribute to the success of asset managers.

Role of Asset Managers

• Set the Framework: The asset management companies or asset managers define the process for the management of a mutual fund scheme and the investments made under it. They outline and document the full process of selecting securities and constructing a portfolio. This framework is used by the fund managers of a scheme to operate.
• Manage the Risk in Different Schemes: Another important role played by asset managers is their ability to manage the risks involved in investing. Their efficiency in managing the risks involved in different schemes with different portfolio structures is important for the investors. An asset manager’s job is to ensure that each of mutual fund schemes managed by it is different yet capable of generating valuable returns to the investors.

Since asset managers play an important role in the functioning of a mutual fund scheme, investors looking to invest must look for the ability and the success rate of an asset manager. This is possible by checking the size of the asset management company, the number of schemes handled by them, and its’ track record in managing these schemes.

Traits of Successful Asset Managers

While there are umpteen asset management companies in the field, only a few have been successful in churning out successful mutual fund schemes. Here are some traits that contribute to the growth of an asset manager.

1. Diversification: An asset management company that has a more diversified portfolio (across assets, geographies, and distribution channels) that can handle the various market cycles is preferred. This can be achieved by offering schemes including SIP options that are diversified by product, asset class and channels. Asset managers offering niche products like funds with lockup periods or tax-managed strategies or retirement accounts also tend to hold on to their assets for a longer period.
2. Pricing: Funds or asset management companies that are more cost-competitive are preferred. Active asset managers can lower their management fees and expense ratios over time to offer products that are preferred over the high-cost offerings by other asset management companies. They can do so by focusing on low-cost growth strategies to build their portfolio of good and reliable stocks.
3. Consistently Outperforming the Competition: Another important trait of successful asset managers is their ability to consistently outperform their peers or competitors and generating superb returns. So, asset managers which strive to outperform their benchmark indices or competitors and have a track record of doing so are preferred by investors,
4. Adaptability to Changing Situations: Asset managers who are quick to respond to changing situations and evolve their investment strategies are the ones that will perform well over the long run rather than the ones that stick to a specific strategy irrespective of the changing scenario.

One of the key factors before you decide to invest in a mutual fund scheme is to check the track record of the asset management company managing it.