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July 17, 2015

Lipper Fund Selectors Forum 2015: What We Learned From the Gatekeepers

by Jake Moeller.

Jake Moeller reviews the inaugural Lipper Fund Selectors & Fund of Funds Forum held at the Thomson Reuters Auditorium, Canary Wharf on July 14, 2015. The webcast replay of this event is available for viewing here.

Reuters/ Toby Melville

Reuters/ Toby Melville

Mutual funds are always being keenly discussed, and Thomson Reuters hosting an event, along with the Chartered Institute of Securities and Investment (CISI), dedicated exclusively to this topic saw a full and expectant house of around 120 guests. Attendees drawn from private wealth, IFAs, mutual fund managers, fund gatekeepers, platform providers, as well as investors witnessed an informative and entertaining three-hour session of panels that brought together some of the industry’s most respected practitioners.

The Art of Fund Selection 

Former Reuters journalist and founding editor of Investment Week, Lawrence Gosling, presided over the first panel session, with panellists Victoria Hasler from Square Mile Research and Tony Yousefian from FundCalibre. Mr. Yousefian and Ms. Hasler outlined key metrics they consider when they add funds to their platforms: Top of the list was the ability to produce repeatable and “explainable” alpha, with Ms. Hasler emphasizing that mysterious outperformance could act as a sell trigger as much as ongoing poor performance.

Lawrence Gosling (L) with Tony Yousefian and Victoria Hasler (R). Photo Courtesy Gregor Logan

Lawrence Gosling (L) with Tony Yousefian and Victoria Hasler (R). Photo courtesy Gregor Logan

Both panellists outlined the considerable due-diligence that is undertaken before any fund is included on a panel, with both agreeing that meeting and interviewing the lead manager is key to understanding how a fund ticks. Other issues such as star fund managers, capacity constraints and costs received forensic examination. Mr Gosling’s assertion that an “approved list” of mutual funds need only be small, was met with some disagreement by both Ms. Hasler and Mr. Yousefian.

Mutual Fund Fallacies

Lipper’s Jake Moeller presented a session on some of the misconceptions of the mutual fund industry. Noting an increase in active fund “bashing,” he used Lipper performance data to show that the majority of active funds in the European and U.K. sectors sit above the first-ranked passive fund over three and five years over various rolling periods.

Lipper's Jake Moeller argues for active funds. Photo courtesy Sally Jasmin Sarma

Lipper’s Jake Moeller argues for active funds. Photo courtesy Sally Jasmin Sarma

Mr Moeller provided data sourced from Lipper that show exchange-traded funds, with an average proportion of 14% of total annual European net sales of all funds, pose no real threat to active fund groups. He also discussed a major problem of mutual funds being their large concentration and urged gatekeepers to consider the benefits of boutique fund groups.

Mutual Funds and Portfolio Construction

Richard Philbin, Chief Investment Officer – Harwood Multi-Manager, James Sullivan, Investment Director – Coram, and Michael Allen, Chief Investment Officer – Momentum Investments, participated in the portfolio construction session. This panel was again moderated by Mr. Gosling. Conclusions here were broad, with Messrs. Sullivan and Allen arguing for the prominence of asset allocation decision-making and with Mr. Philbin arguing passionately that diligent mutual fund selection could add more value than the famous Brinson study would suggest.

(L-R) Lawrence Gosling interviews Richard Philbin, Michael Allen & James Sullivan. Photo courtesy Sally Jasmin Sarma

(L-R) Lawrence Gosling interviews Richard Philbin, Michael Allen & James Sullivan. Photo courtesy Sally Jasmin Sarma

The durable trend of multi-asset and risk-focused was discussed, with Mr. Sullivan noting that clients’ different risk tolerances are driving innovation. Mr. Allen lamented that cost considerations are potentially compromising client returns, and Mr. Philbin noted that platform restrictions limit the building blocks that fund-of-funds managers can access.

The Future of European Integration

The CISI’s George Littlejohn interviewed acclaimed European integration consultant Graham Bishop. Mr. Bishop provided refreshing insights into the current situation in Greece in the context of the overall future of the European Union. While being sanguine about the Union’s future, he painted a picture of a Europe of differing composition, with the U.K. likely participating eventually only as a trading member and with more Eastern European countries being admitted. He also highlighted the importance of the private sector in driving common European standards and raised the potential problems that the failure of T2S could result in with respect to securities ownership.

George Littlejohn interviews Graham Bishop. Photo courtesy Sally Jasmin Jarma

George Littlejohn interviews Graham Bishop. Photo courtesy Sally Jasmin Sarma

Audience participation at this event was exceptionally high, with some particularly passionate points of view being raised throughout the event. At the start of the Forum audience members were encouraged to engage this event via social media, and #LFSF15 garnered considerable commentary. The live webcast organised courtesy of the CISI ensured that the Forum reached a global audience.

The issues raised in this Fund Selectors Forum will no doubt be discussed on an ongoing basis, and Thomson Reuters and the CISI have proven the importance of facilitating such crucial debates.

A packed house attended the 2015 Lipper Fund Selectors Forum. Photo courtesy George Littlejohn

A packed house attended the 2015 Lipper Fund Selectors Forum. Photo courtesy George Littlejohn

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