The multi-manager team at LV= Asset Management says its analysis of the investment team and process behind a fund could lead to a new launch being preferred in its portfolios over an established fund that has had several managers.
LV= is aware that to generate outperformance, multi-managers need to be invested in funds with a good track record but will invest in new funds on the basis of their objectives and the manager’s previous track record with other funds. Head of multi-manager and fund selection Tom Caddick explains that a fund with a 15-year track record would be treated as having a one-year track record if its management team and investment process had been in place only for a year. A new fund managed by a team with a good track record built up at their previous company would generally be preferred, but Caddick says a range of factors would influence the decision whether to invest in a new fund.
One example is where the management team was using a computer system with their previous company that is no longer available to them in managing their new fund. Another is whether the team is settled, with the right remuneration structure in place.
Caddick says: “We do invest in new funds, for example, we bought the Jupiter absolute return shortly after it launched. But we would not invest in funds where the managers are not in one place long enough to gain a long-term track record.”