Jasmine Yu, director of manager research and monitoring for BNY Mellon Wealth Management, is responsible for fund selection for Asian wealth clients. Based in New York, she also sits on the Hong Kong investment committee.
She recently spoke to AsianInvestor magazine on her approach to fund selection and the red flags that can pop up during the search process.
Q. What is your overall approach to fund selection?
We focus on what a manager does best. What are the top one or two things they do best? What is in their DNA? A fund house may have 300 products but we are mainly interested in their flagships.
Sometimes managers are straightforward about what they do best. But sometimes, they want more support for a particular product and showcase that instead of showing us what they do really well.
We are in the business of knowing fund managers, so we follow managers over long periods of time. The team has, on average, 15 years of experience. We know [managers’] reputation, we know their capabilities; we are not just picking names from a database without any working knowledge about them.
Q. What are red flags when it comes to manager selection?
Asset management is a people business so we place a lot of emphasis on the people side – their experience, stability and longevity of the team. We also like key people involvement.
A lot of firms put founder names on the door but if the key guy is not involved, that is definitely a red flag. The relationship among the team is also important; the team needs to challenge each other’s ideas, but at the same time, the environment needs to be collegial. Otherwise, people are not going to stay very long. Another related issue is when the key person leaves the team. Often, we don’t stay with the fund.
As I said, we also like fund companies that are focused. The degree of transparency is important as well. When a fund manager claims that they are so sophisticated that you will find it difficult to understand what they are doing, often it’s not the research analyst who has issues, it’s the manager.
And of course, we also like managers who are unique and have a competitive advantage. They don’t just have a ‘me-too’ product.
The manager must also have good execution capabilities. I have met so many great investment thinkers [who] struggle to execute and therefore cannot implement an investment idea. That is definitely a red flag.
We also look at legal, compliance and regulatory risks. We want to stay away from managers that may have been accused of insider trading, or received a warning from the regulator.
Finally, we tend to sell when we find a manager has changed investment process and/or style. For example, we may have hired a value manager and because of market conditions, they changed their style to growth in order to outperform.
This story is adapted from an interview that featured in the December 2018/January 2019 edition of AsianInvestor magazine.