Issue No.


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Are Fund Managers Competent?

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Normandy Advisory Services Sdn. Bhd (Licensed Investment Advisor)
15th Floor Menara Multi-Purpose, No 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur
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Investment opportunities are found everywhere. Many investors abroad and an increasing number of local investors invest through mutual funds or more popularly known in Malaysia as unit trust funds managed by professional fund managers for better and more secure returns.

Are fund managers competent enough to handle our hard-earned money? Are fund managers who hit a 80% return within one-year period simply pure lucky? These are some of the questions normally debated by the investors. In any case, it is the investors who will be most affected.

You may come across news in the international media where respected fund managers who headed reputable investment banks were terminated as a result of their poor performance where a man on the street can equal.

A fund manager could be the absolute winner over a few years and underperform the market dreadfully the following years. Some fund managers despite rosy advertising of their funds, simply fail to perform and that raises the question about the true caliber of the fund managers. It is no surprise that there are relatively few managers who beat the S&P 500 Average or the KLCI with consistency.

Investors would scream when fund managers stay conservative while the rest of the competitors perform remarkably well in a soaring stockmarket. It is simply not easy for ordinary investors to accept the fact that they received returns of less than a sen from a fund that had promised so much and are managed by high-profile fund managers who are paid handsomely every month.

Managing other people's money is a profitable business and fund managers are paid to deliver results. Investment losses produce unemployed managers. The usual excuse given by the fund managers on their poor outing is that the results are unsatisfactory despite the managers' best efforts. But when the funds deliver returns, then it is because of the managers' efforts and skills, forget about everything else.

There seems to be a growing concern among the investors everywhere as to how well the interests of the investors have been served by these "so-called" experts. Some investors in fact argue that some fund managers are no better than them. The only distinction is they, the fund managers have more money to play with - more allowance to cover losses?

Uninformed local investors in a largely conservative Malaysian financial market will not prefer anyone like Nick Leeson who, because if his uncontrollable activities, created a chapter in the history by bringing down one of the oldest bank in the world.

While there are many capable fund managers around in the various financial markets, there is always a risk that you might bump into someone who performs well one day and flops the next.

Market experts very often come up all kinds of predictions and strategies but do investors actually count how many times are right or wrong? Some fund managers or market analysts had painted a very bullish picture of the local stockmarket at the beginning of year have had to revise their opinions right now.