Our approach

The Bestinvest MRI has been designed to separate the monkeys from the geniuses.

Fund managers change jobs, on average, every four years – so the past performance records of most funds can be disregarded as a reliable indicator of the future. The solution to this problem is to track the performance of the manager, NOT the fund.

Manager Statistical Research Methodology

Our statistical analysis comprises a series of steps:

• 1 Career record

  We try to look at the record of a manager, for the entire duration of their career, in each sector (we split out different sectors because some benchmarks can be much easier to beat than others). If a manager runs more than one fund in a sector for any period of time, the results of those funds for that period are averaged.

• 2 Relative performance

  We look at the returns on a monthly basis, both in absolute terms and, more importantly, relative to a benchmark index.

• 3 Cumulative performance

  We then carry out a number of calculations on this dataset so that we can look at performance in each of the past five years and cumulatively over the past 3 and 5 years. In cases where the manager has taken gardening leave, or a sabbatical, the periods will not be continuous, in which case the records for the past 3 years and 5 years may be incomplete.

• 4 Risk control

  As part of our process to try and understand the style of the manager we calculate the Maximum Loss (in both absolute and relative terms) over the manager's career. Every manager goes through periods of underperformance, but some operate with strict risk controls to limit the downside. Statistically, it is to be expected that managers with long track records will also have incurred larger losses, although this is not inevitable.

• 5 Statistically analysis

  Then, we look at the probability that these results could have been generated simply by chance. Remember that if you allowed 1,000 monkeys to run funds on a random basis you would expect 31 of them to beat the Index every year for five years (assuming nil charges), at which point they would be accorded the status of investment geniuses by many.

Joint Managers and Team Track Records

Dealing with joint managers or management teams with a number of staff is problematic. In the case of joint managers we could either attribute the fund's record to each of the managers individually or treat them as a unit. In cases where the managers are taking joint decisions on stock selection (rather than individually running parts of the portfolio) we take the latter approach. Where teams are responsible for managing funds we will usually treat the team as one unit but identify the key decision makers within that team and what their roles are. As a result the departure of one member of a team or management pair can be significant for our rating of a fund.

Manager of the Month

Martin Lau

First State Greater China Growth

Career MRI 99.0%

Though Fidelity’s Anthony Bolton is currently making headlines with his new China fund, First State’s Martin Lau already has a successful track record in the region dating back to 1998. Born in Hong Kong, Lau studied engineering at Cambridge University then started his career at Invesco Perpetual before joining First State in 2002. Lau works in the Asia Pacific team under the legendary Angus Tulloch and is tipped by many as a Tulloch’s possible successor. Lau's four star rated First State Greater China Growth fund offers exposure to Hong Kong and Taiwan as well as mainland China, and has achieved strong outperformance whilst offering some downside protection in what is a volatile region for investors.

View manager record