Financial Times Guide to Investing in Funds

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The manager

What to deduce from a manager’s set up

Office space and business organisation

Some managers’ or advisors’ offices are so extravagant that they make

headlines! This is rare but an office can tell you about the style of busi-

ness management you may be getting involved with. Investors need

to understand how managers or advisors establish themselves. This

can reveal certain attitudes that can reflect more or less well on the

way the business is run and the consequences this could have for your

money in the relevant fund.

Managers in London for example are going to be in or around afflu-

ent areas such as Mayfair. This is where some of the earlier managers

started and the area has become a magnet for the rest. Although it is

fine to have this concentration of talent in one area, anyone spend-

ing an inordinate amount of money on their office lease to be in this

location may not be showing the greatest business sense. I like to visit

an office and work out whether it is commensurate in stature with the

size of the assets of the relevant fund or client base.

Insurance

Most managers or advisors should have insurance cover, especially

professional indemnity (a.k.a. errors and omissions) insurance. This

insurance would give them protection against claims for potential mis-

management of the fund’s assets. This is significant as the assets in

the fund and potential losses are usually many multiples of the assets

available to the manager or advisor through its own capital. Taking

out insurance cover is not however a legal requirement. Unlike other

professionals (such as lawyers) whose regulatory bodies may require

some minimum level of insurance this is not the case for managers.

Where managers do have insurance cover, as an investor you should

ask for evidence of this, especially as the level of cover may vary

widely. Although there is no real benchmark that could help deter-

mine what an appropriate level of professional indemnity insurance

should be, most firms would tend to have enough insurance cover to

insure up to 1 per cent of the overall assets they manage.