Critically discuss the article - Essay Example

WANT AN INVESTMENT MANAGER? HERE’S WHAT TO LOOK FOR: ARTICLE REVIEW By Want An Investment Manager? Here’s what to look For: Article ReviewThe article, “Want an Investment Manager? Here’s what to look for” seeks to advice investment companies and especially banks and financial institutions on the best criteria to use when hiring the best investment managers. Of course, every trained manager in the field is an investment professional, if he has been certified to practice investment management.

However, according to Sullivan, there is more to the training and experience (Sullivan 2012, p. 1). Drawing reference to the report “The Art and Science of Manager Selection” by Barclays, he conquers with the experts that past results should not be used to measure the future performance by a manger. Just like in the investment business, the author argues that using past performance of a company’s stock is dangerous. He points out the likelihood of the stock underperforming in the future (Sullivan 2012, p. 1). According to Sullivan (2012, p. 2), investors ask the wrong question by raising an argument of the best funds between active and index funds.

To the author, searching for patterns does not result to good investment policy. He proposes that the best way of picking good managers is by mixing art and science. The ability of mutual and hedge fund managers to excellently perform when the indexes are at the peak and then declining as more money comes into the funds makes the practice an art. The science of choosing managers involves a four element criteria of investment process, organizational structure, past returns and due diligence. He points out that performance track record is not the only indicator of good performance by a manager.

To him, a good manager ought to have an investment plan or an institutional structure that is better than what people can see. The manager should not only use market timing, but rather understand the market properly to know when to enter and when top exit (Sullivan 2012, p. 3). The author, in trying to advice investors on the best methods to use in hiring managers who can perform has incorporated a number of factors. To him, those who use past performance make a big mistake. A number of factors can lead to managers performing well, which should be verified.

However, when hiring, there is no indication that the manager is likely going to maintain the performance record or not. The author was right that a number of factors are involved in evaluating performance by a manager. The fact that the past does not always reflect the future outcome is true. However, past performance cannot be rubbished altogether. The very factors that the investors look for in the investment plan by a manager to forecast about the future are the same that the manager could have used to achieve past performance.

Thus, past performance remains crucial in evaluating performing and non-performing managers. Works Cited Sullivan, P 2012, Want an Active Investment Manager? Here’s what to Look For, New York Times. Retrieved 18th April 2013. http://www.nytimes.com/2012/03/31/your-money/what-to-look-for-in-an-active-investment-manager.html?pagewanted=all&_r=0