Think you can predict the future, think anybody else can? Well, when it comes to fund selection, a CISI event will offer a fascinating insight into times ahead, writes Gregor Logan MCSI
Opinion in the investment management industry has long been divided on the issue of active versus passive management. Passive market share has continued to grow at the expense of active as active managers have lost the argument that the prospect of outperformance of a benchmark or alpha generation warrants a sometimes significantly higher fee. And the passive proponents argue that even if you can justify the fee, can you consistently identify the future alpha generators?
Significant momentumThe institutional market moved to a predominantly core satellite approach some years ago, the core typically being filled with index tracking products. The wealth management and retail market has been slower to get there, but there is a significant momentum that way now. As well as the big index tracking product providers there is a growing list of fintech companies typically using trackers at the asset level, sometimes with an active asset allocation overlay, sometimes a fixed asset allocation.
Having initially held out against offering tracking products for fear of cannibalisation of their active offering, many of the large global active managers have conceded and now also offer tracking products.
There are significant numbers of active managers who outperform their benchmarks and sectors over certain time periods. There are very few who are able to consistently outperform over all time periods and those who do attract a large following. Money flows to where returns have been good, size then often in the process removing the arbitrage that created the outperformance in the first place.
In the institutional market, the consulting actuaries have long dominated active manager selection. I think it is fair to say the jury is out on whether they are able to consistently identify the alpha generating managers.
In the wealth management/ retail arena it is left to the fund selectors or multi-manager fund managers to identify future winners. But again, how much added value do they bring? Can they identify who will outperform over the next investable time horizon within sectors and/or between sectors and geographies. It is a daunting challenge, but one that some think they are up to. They really do think they can predict who will outperform.
On 14 July 2015 the CISI will hold a forum in conjunction with Thomson Reuters in London’s Canary Wharf to discuss the art and science of fund selection and its importance as a building block of portfolio construction.
"This event promises to give a fascinating insight into the often opaque and difficult to understand world of fund selection"The panellists and speakers for this event, Fund Selector & Fund of Funds Forum, include Richard Philbin, CIO – Harwood Multi-manager, Tony Yousefian, Consultant – Fund Calibre, Michael Allen, CIO – Momentum, James Sullivan, Investment Director – Coram, Victoria Hasler, Head of Research – Square Mile, Jake Moeller, Head of Lipper UK Research – Thomson Reuters and Graham Bishop, Chairman - Consultancy on EU Integration: Financial, Budgetary, Economic, Political. The panel moderator will be Lawrence Gosling, Founding Editor – Investment Week.
It will cover the philosophical debate of active v passive as well as look as the sustainability of alpha in an unpredictable world. It will look at the importance of research in choosing a fund and cover compliance and governance issues as well as considering mutual funds as a vehicle to reduce risk at a sector and portfolio level.
This event promises to give a fascinating insight into the often opaque and difficult to understand world of fund selection.
Gregor Logan MCSI is an investment management consultant with 35 years’ experience in the fund management industry as a portfolio manager and chief investment officer 
Register for the webcast on 14 July