Don’t invest in active funds unless you are equipped to monitor them – Bestinvest warns DIY investors

28 May 2013

Active fund management is a people business and while there are some products managed with a genuine “team” approach or automated process, in most cases performance is ultimately down to the decisions taken by a key ‘trigger puller’ according to investment group Bestinvest. Yet as investors have been reminded in recent months with a flurry of high profile fund manager moves, these individuals will change from time to time. Bestinvest suggests that when these events happen, investors need to know about them, and also reassess the case for sticking with a fund or moving on.

“Analysing and monitoring the performance track records of individual fund managers is not a straightforward task,” explained Jason Hollands, Managing Director of Bestinvest.

Hollands points out that it is standard practice across the industry to display performance data for up to five years. “This is problematic for a number of reasons,” he said. “Firstly, because the average period of a business cycle in the UK since the second-world war is 5.6 years*. So a five year assessment period barely covers a manager’s experience across a single cycle. Secondly, on average funds change managers approximately every four years, meaning the numbers you are presented with may not represent the track record of the person managing the fund today.”

Bestinvest argues that it is important for investors to dig behind the performance record of particular funds, to analyse the career records of the managers currently running them, which means combining their career history of running similar portfolios at each firm they have worked for where the data is in the public domain.

Yet Bestinvest estimates that only 18% of UK onshore funds are managed by teams with track records operating in the same IMA sector that span 10 years or more of data, a figure that drops to just 7% when looking for teams with 15 years or more experience managing money in a sector.

Proportion of funds in each sector managed by individuals / teams with identifiable career records of more than 10-years in the sector


The sector with the largest concentration of experienced managers is the UK Smaller Companies sector, where 27% of funds are managed by individuals or teams with more than 10 years of identifiable career records in the sector. These include the likes of Giles Hargreaves (Marlborough), Daniel Nickols (Old Mutual) and Harry Nimmo (Standard Life).

Bestinvest provides investors with access to a proprietary research database free-of-charge at to help investors to assess how individual managers have performed over their entire career in a sector. This provides investors with career performance of managers, the ratio of months that they have outperformed and underperformed, their worst losing streaks and a statistical measure as to the probability they have added value over luck, called the Bestinvest Manager Record Index (MRI). The MRI score aims to weed out those managers who may be ‘shooting stars’, who gained their status from a short period during which they were hailed as geniuses and sucked up assets.

Jason Hollands concluded: “Whether you take advice or choose to invest on a ‘DIY’ basis, it is vital to understand the track record of the individual you are investing with and then to monitor your portfolio carefully. DIY investing shouldn’t be simply about selecting the lowest cost platform, but the services, research and monitoring tools that will be provided to you to help you manage your portfolio. If you are not going to equip yourself to do this, then it doesn’t make sense to invest in actively managed funds. A fund purchase is only the start of your journey, not the conclusion of some pre-investment homework.”

For access to Bestinvest’s tools for analysing manager career records, including Manager Record Index (MRI) scores, monthly up/down ratios, career performance charts and CVs please visit

*Source: Bergman, Bordo and Jonung

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Important information
Funds will have varying risks depending on the geographical area and/or industry sector in which they invest, and you should ensure you understand these risks before you invest. The value of investments can go down as well as up, and you may get back less than you originally invested. This article is not a personal recommendation, or advice to invest.

About Bestinvest:
Founded in 1986, Bestinvest was a pioneer of helping clients reduce the costs of investing through discounting commissions. Today Bestinvest has grown into a leading private client adviser which helps over 50,000 investors. Bestinvest offers a range of services including guidance, investment advice, financial planning and discretionary portfolio management all of which are underpinned by a commitment to rigorous investment research. Through its low cost Select service, Bestinvest offers execution-only investors a Self-Invested Personal Pension Plan (SIPP), Individual Savings Account (ISA), Junior ISA (JISA) and Investment Account with access to more than 2,000 funds as well as investment trusts, shares and Exchange Traded Funds. Bestinvest has won numerous awards including ‘Self-Select ISA Provider of the Year 2011’ and ‘UK Wealth Manager of the Year 2011’ as voted by readers of the Investors Chronicle and Financial Times and Investment Adviser of the Year 2012 at the Professional Adviser Awards. Headquartered in Mayfair, London, Bestinvest has 14 regional offices with 200 staff servicing clients with over £4 billion of assets.

About Tilney

Tilney is a leading investment and financial planning group that builds on a heritage of more than 180 years.  Our clients are private investors, charities and professional intermediaries who trust us with over £23 billion of their assets. We offer a range of services including financial planning, investment management and advice and, through our Bestinvest service, a leading online platform for those who prefer to manage their own investments.

We have won numerous awards. Tilney has been awarded Best Conventional Advisory Service at the 2018 City of London Wealth Management Awards, Best Advisory Service in the 2015 City of London Wealth Management Awards; Investment Award – Cautious category in the Private Asset Management Awards; and Stockbroker of the Year, Execution-only Stockbroker of the Year and Self-select ISA Provider of the Year 2015, as voted by readers of the Financial Times and Investors Chronicle. Bestinvest was voted Best SIPP Provider and Best Fund Platform at the 2017 City of London Wealth Management Awards, Best Direct SIPP Provider at the Awards 2017, Best Stocks & Shares ISA Provider at the 2017 Shares Awards, as well as Best Self Select ISA Provider, Best Online/Execution-only Stockbroker and Best Investment Platform 2017 at the FT and Investors Chronicle Investment and Wealth Management Awards, as voted by readers of the FT and Investors Chronicle.

Headquartered in Mayfair, London, the Tilney Group employs over 1,000 staff across our network of 30 offices, enabling us to support clients with a local service throughout the UK.