How we found the Fund Manager of the Year

The purpose of the Money Management/IMCA Fund Manager of the Year Awards is to recognise excellence in funds management by the investment consulting community.

Recognising the limitation of short-term performance, and indeed most consultants’ investment processes, the aim is to recognise managers that have not only delivered impressive investment performance, but are likely to continue to do so into the future.

We have short-listed 10 categories reflecting current portfolio construction practices. Multi-manager funds are excluded as they reflect the skill of the manager-of-managers (or consultants), with the exception of the hedge funds category.

Since the majority of retail flows are invested in wholesale trusts via platforms, we have used wholesale trusts as the proxy for the managers.

All consulting organisations that are members of the Investment Management Consultants Association (IMCA) were invited to be involved in the awards judging process.

The consulting organisations have agreed to participate on the condition that individual ratings or votes from no party will be made public. This condition has been incorporated into the process.

To accommodate the panel approach, the following two-stage process was used.

Stage one involved a quantitative (performance) filter. The aim was to short-list five to 10 managers in each category (five in smaller categories and 10 in larger categories); the collated performance analysis also facilitated discussion in stage two.

All performance analysis was done on three-year data to December 31, 2005. Where funds were not available, panel members could add individual funds to the short-list for stages one or two by making the performance history available.

The purpose was to narrow down the universe to funds or managers that had good risk-adjusted performance, but the condition was, and this was a clear departure from last year, that we didn’t want to focus on the one-year data.

The next question was what sort of data would we use. Eventually, we decided on three types of data: alpha, reward to risk and information ratio.

Funds were then ranked from one to 50 depending on how many were in the universe.

After selecting the top 10 to 15, we circulated the names to the panel, who were then allowed to add any they felt should be included, but where data wasn’t available. Interestingly, very few managers were added — most of the panel went by the list the quantitative figures had thrown up.

Stage two comprised of a qualitative voting round. This included subjective voting by the IMCA consulting community.

Each member of the panel was asked to rank the top three to five managers in each category. Points were then awarded based on votes, which enabled us to find a winner and finalists for each category.

However, in some instances, the voting system only highlighted a winner and finalist — with no third runner-up being an obvious choice.

~ By Investment Management Consultants Association.