Mutual funds are pools of money managed by investment companies, normally led by one or more professional fund managers. In addition to diversification, one of the key reasons most investors want to invest in an actively managed mutual fund vs an individual stock is the trust in the fund manager for his ability to manage the volatility and beat the market regardless of the market condition. Unfortunately, more than 70% of the fund managers cannot beat their market benchmark consistently over a 5 year period.
So what are criteria to evaluate mutual fund managers to ensure investment success? After several years of research, Fund Mojo has created a unique method to discover best fund managers based on 25 criteria using historic data analysis ranging from fund manager’s performance history and risk adjusted performance to portfolio holdings and transactions. Below are some of the criteria Fund Mojo uses to rank a mutual fund manager:
– Performance needs to be accomplished by the same fund manager on a consistent basis. Fund Mojo gives great credit to a fund manager who can outperform its category peer on a consistent basis over many years. If the performance is not generated by the fund manager (ie. recent manager changes), then it is hard to predict whether a fund will continuously perform well in the future.
– Performance needs to be accomplished under reasonable volatility. Some funds have great returns on average over years, but the magnitude of up-and-down is significant that they are not suitable for investors to tolerate. Top funds should have great Sharpe ratio and up-year vs down-year track record.
– Expense should be in-line with the category. Great managers do not come cheap and small funds need to charge a higher fee to survive. So it is OK to provide buffer for these managers, but it is important for investors not to pay super-premium for a fund with average return.
– Safety. While there are great upside to be accomplished, successful investors stay in the game because they don’t lose money over difficult time. Fund Mojo puts significant weight on a fund’s ability to survive bear market and not to lose a lot of money over a prolong downturn.
Taking these mutual fund evaluation criteria into account, Fund Mojo systematically analyzes more than 18,000+ mutual funds by looking deeply into a fund manager’s history, risk adjusted performance, portfolio holdings and transactions in order to find the top 1% of fund managers. If you are interested to see the latest top fund manager list, please go to Fund Mojo and click on Fund Intelligence to see all of the fund screens or visit the top fund manager list.
Fund Mojo provides financial intelligence about a fund, its fund manager, and historic tracking information. We care more about the fund manager vs the fund and place great emphasis on who manages the fund, the risk vs return and fund management philosophy. We also provide a community where our users can track, share, and compare their portfolio, and find the best financial planners and advisors to help them achieve financial freedom.