Usually designed to a high specification, asset manager foyers often have the crystal fund awards that fund managers have collected over their years of operation on tasteful display. In addition to their sparkling aesthetic, these quiet sentinels stand as evidence of a fund group’s ability to add value to investors.
A considerable number of media organisations and data providers (including Thomson Reuters Lipper) host an annual fund awards event, and there are plenty of opportunities for a fund house to pick up these highly sought-after gongs.
Categories and methodology behind the various awards differ, but past performance is usually a major consideration – a fund with a period of relative outperformance of its peers will often find itself as a contender.
I’ve often wondered how important these awards are to the investors of winning funds and what they tell us, if anything, about the potential fortunes of the fund in the future.
Certainly, awards are meaningful to fund groups themselves. Many individual fund managers proudly collect their trophy, and groups subsequently promote their victory in marketing materials. Whether awards generically are of any use in assessing the enduring quality of an investment is more open to speculation.
I believe they are, but only in addition to other layers of due diligence. There have been a number of repeat generators of excellence over the years – Prusik Asian Equity Income, Henderson Preference & Bond, Russell Investments UK Long Dated Gilt, and Techinvest Special Situations are funds that spring readily to mind.
A considerable number of fund groups such as Fidelity, Kames, Columbia Threadneedle, and Schroders have consistently had the same fund appear as a candidate or winner over multiple discrete years. It is evidence of this persistency of performance that is the value of a fund award. Nearly 70 per cent of UK Lipper Fund Awards winners over three years for 2014 remained in the first or second quartile of their categories for the same period at the end of 2016.
It is unlikely that any serious fund gatekeeper would confess to using a fund award as a metric for selection processes, but I maintain that there are worse ways of assessing a potential investment in isolation.
However, such discussions may soon be moot. For 2016, 45 per cent of estimated net flows into pan-European-based mutual funds were into passive vehicles. By comparison, for 2015 this was 19 per cent and for 2014 only 8 per cent.
Those glittering, silent totems standing proudly on display in fund group foyers may become increasingly valuable indeed.
Jake Moeller is head of UK & Ireland Research at Thomson Reuters Lipper
