Global Matters Weekly – 29 March 2021

Fund Selection 101

by Tom Delic

The CEO of a business has many responsibilities, two of the most important being the strategic and operational oversight of the company. Another vitally important aspect of their role is capital allocation, an area that is often underappreciated by an investor but also poorly carried out by many CEOs. When researching a fund, it is often useful to view the fund manager as a CEO of a conglomerate, responsible for making investments in a portfolio of businesses, with none of the strategic and operational pressures, thereby making capital allocation of primary focus. Viewed through this lens, making an investment through a fund is a partnership with the fund manager, who you are entrusting to manage the capital of your clients in the best possible way. Just like the listed equity markets represent a huge variety of businesses that you can choose to own a piece of, a universe of funds represents a list of potential long-term business partnerships. Below is a summary of a growing body of studies that can help form a filter for the universe when picking who you should partner with.

Market Snapshot

  • Global equities rose 0.7% last week
  • The global coronavirus case count continues to rise steadily, with European Commission President von der Leyen announcing that “we’re at the start of the third wave of the pandemic”
  • Brent crude rose 0.1% last week to $64.6 a barrel
  • Gold fell -0.7% to $1732.5 per ounce