GREENWICH, Conn. Seventy-five percent of U.S. money managers in a recent study said they think that firms and financial advisers should evaluate money managers based on qualitative factors such as philosophy and process.
The Greenwich Associates study revives the age-old debate over whether philosophy or performance is more important in money management. The answers werent cut and dry, the study found.
Respondents said they think money managers should be evaluated on both philosophy and performance.
Fifty-one percent of respondents cited performance and risk as extremely important factors. Managers were asked to indicate a series of factors that they thought were extremely important in how firms should benchmark funds.
Whats important to them is that people understand how they manage money, said Andrew Klebanow, a consultant with Greenwich Associates. In other words, the managers are saying, Dont just look at performance. Its much more than that. Weve seen many examples of people chasing performance, and we know what that turns into.
In the study, 112 domestic equity and fixed-income managers were surveyed on the Internet and by telephone. The interviews were conducted from January to April. The study was commissioned by Russell Investment Group, Tacoma, Wash. The purpose of the study was to ask money managers what factors they thought financial firms and advisers should use to measure a money managers performance.
For their part, advisers said they try to look at a number of factors, but they cant deny that performance often wins out, even with the best intentions.
For years, Ron Pearson, a certified financial planner at Beach Financial Advisory Service in Virginia Beach, Va., said he avoided bonds from Loomis Sayles & Co. LP of Boston because he didnt like that the manager purchased junk bonds. The performance ultimately won out.
Mr. Pearson now mixes bonds from Loomis and Pacific Investment Management Co. of Newport Beach, Calif.
But philosophy isnt a factor to Barry Cliff, an adviser with AFC Asset Management Services Inc. in Gaithersburg, Md.
I use an old saying: Judge a golfer by his score and not the clubs he uses, he said. But Mr. Pearson does pay close attention to the amount of risk that managers take with their stock purchases compared with the returns they earn.
Who cares about their philosophy? he said. Whats important is, how did they do and how much risk did they take?