Concentrate on asset allocation

Finance | Gareth Jones | 1 Apr 2007

Charities should concentrate on getting their strategic asset allocation right rather than their choice of fund manager, according to Roger Brown, an independent consultant formerly of Blackett Research. He cited research that suggests that 93.6 per cent of investment performance is a result of strategic asset allocation, while just 6.7 per cent comes from fund manager performance.

Furthermore, he argued there is no evidence that investment consultants are any more successful in selecting fund managers who outperform their objectives than random selection. He put this down to their being underresourced for the task, particularly in recent years with a new range of asset classes to contend with, and the concentrated nature of recommendations, with 50 per cent going to just 10 managers.

Where investment consultants can have an impact is by concentrating on the fund manager's wider service rather than promises of future excess returns, he concluded.

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