Evaluating investment managers

[JBird]

Suppose you must outsource the management of your portfolio. What questions would you ask prospective managers to evaluate them?

[Packer16]

I am assuming you want high risk adjusted performance.  If so, then I would look at how they value companies and how comfortable they are in concentrating positions.  The only way to outperform is be different and of the manager is reluctant to be different then what is the point.  The more diversified they are the less likely they are going to out perform enough to pay their fees.  Another way to increase concentration is via LEAPs and warrants.  If you require diversification, then I would use value tilted index funds to keep the fees down.  Does the managers circle of competence include a number of sectors/industries?  What has been the managers biggest mistake and how did they fix it going forward? Finally, you can look at performance numbers.  Another approach that probably requires less research is but into owner operators discussed on this board as they are doing the same thing as mutual funds. 

 

Packer

[blainehodder]

Relevant link:

http://turnkeyanalyst.com/2013/06/picking-managers-based-on-the-facts/

 

I just can't see myself paying fees to investment managers when companies with solid allocators will work on behalf of shareholders for next to nothing at BRK and FFH.  Heck you can have Munger picking winners for you by just buying DJCO.