ONE of the first things investors usually look at when choosing a fund is performance. If two funds are available, most people would naturally be attracted to the one that has delivered the higher return.
A fund may have done well over the last five or 10 years, but that does not automatically mean the same people are still managing it today. Fund managers move from one company to another, investment teams change and market conditions also evolve. This is why looking at historical returns alone may not be enough.
If you are placing your money in a professionally managed fund, it also makes sense to understand who is making the investment decisions for you.
The first thing to consider is your own investment goal. Before evaluating any fund manager, you should be clear about what you are trying to achieve. Are you investing for retirement, education, future income or simply long-term capital growth? How much risk can you tolerate? How long can you leave your money invested?
These questions matter because not every fund manager will suit every investor. A manager who follows an aggressive growth strategy may be appropriate for someone with a long-time horizon and high tolerance for volatility. The same manager may not be suitable for someone who will need the money in two years. There is little point looking for the best fund manager if you are not yet clear about what you need.
The second factor is the manager’s track record. Suppose a fund shows a strong 10-year return. The next question should be: was the current fund manager responsible for those results? If not, then the fund’s historical performance may reflect the decisions of several different managers.
This is why it is useful to look at the manager’s own history. How did the funds under that person’s management perform during strong markets? More importantly, how did they behave during weak markets? Almost anyone can look good during a broad bull run. The more revealing test is often how the manager performs when conditions become difficult.
The third factor is investment philosophy. Fund managers usually have a particular way of looking at the market. Some focus on value and look for companies they believe are undervalued. Others prefer growth companies with strong earnings potential. Some rely heavily on fundamentals, while others may incorporate technical analysis, market timing or quantitative strategies.
There is no single investment philosophy that works all the time. This is why an investor should understand whether the manager’s approach is consistent with the type of risk he is willing to take.
One way to check this is to look at the fund’s portfolio. What kinds of companies does the manager buy? Are the holdings concentrated in a few sectors? Does the manager frequently change positions, or does he tend to hold companies for long periods? The portfolio often reveals whether the stated philosophy is actually being followed.
The fourth factor is experience. A seasoned fund manager has one obvious advantage: he has already seen different market cycles. He may have managed money during bull markets, recessions, financial crises and periods of high volatility. That experience can help when markets stop behaving the way investors expect.
But experience should not be measured only by age. Younger fund managers may bring fresh ideas, stronger familiarity with newer industries and more current analytical tools. Many of them also spend years in research before taking responsibility for a fund.
The better question is not whether the manager is young or old, but whether he has developed enough judgment, discipline and consistency to manage money through different conditions.
The fifth factor is performance relative to the benchmark. This is important because returns should always be viewed in context. An equity fund may compare itself with the Philippine Stock Exchange Index or another appropriate benchmark. If the market rises by 20 percent and the fund gains only 8 percent, the positive return may still represent underperformance.
On the other hand, if the market falls sharply and the fund declines much less, that may also say something about how the manager controls risk. The comparison should therefore cover several years rather than only one good or bad period. If a fund consistently underperforms its benchmark after fees, investors should ask whether the active management is really adding value. If not, a lower-cost passive index fund may become a reasonable alternative.
The right fund manager is not necessarily the one with the highest recent performance. It is the one whose approach, experience, risk management and long-term record are most suitable for your own financial objectives.
Rienzie Biolena is a Registered Financial Planner of RFP Philippines. To learn more about personal financial planning, attend the 118th RFP program this October 2026. Email info@rfp.ph or visit rfp.ph to learn more about the program.
