When you’re validating a money manager recommendation, chances are high that you’re looking for information regarding the managers performance against its own benchmark over time. While it’s up to the manager to provide this information to a third-party reporting database, many managers elect to do so, in part because it helps with transparency of their product and allows users to review the fundamentals of their strategy and to compare results alongside the appropriate chosen benchmark. Of the money managers that choose to report their performance, they typically report the investment performance of their products to institutional databases such as Morningstar, eVestment, and Informa Investment Solutions, among others.
Subscribers to these databases can then compare the reported performance of thousands of different investment products and use custom filters and searches to narrow down a potential search for a product that best fits what they are looking for. By comparing managers who report to a database like this, a researcher may be able to whittle a universe of hundreds or even thousands of products down to just a handful of strategies that meet the investor’s specific criteria.
But what if an investment manager doesn’t report the performance of their products to a database?
What It Could Mean When a Manager Doesn’t Report Their Investment Performance
Reporting performance to an institutional database is voluntary and some investment managers choose not to report their performance.
This raises the question of why a manager wouldn’t report performance to a database. Although reasons may vary, there are a couple of key reasons that a manager may not report their performance publicly.
One possible explanation for a manager not reporting could be poor performance; the manager may decide that they don’t want to publicize it.
Another plausible reason is that a manager may be testing out a new strategy and will only start to report to databases once the strategy has more of a track record. There may be strategies whose performance never does end up being reported to databases.
Regardless of the reason, a strategy that doesn’t have publicly reported performance information can present a challenge for investors looking for information.
What if a Manager Stops Reporting Their Performance Information
Another potential red flag for investors to watch out for is when a manager suddenly stops reporting performance of an existing strategy.
For example, if a strategy has been around for years and the manager has reported performance each month or quarter since the inception of the product and then suddenly the manager stops reporting performance, this could indicate a big change. Once again, it could be that recent poor performance has led the manager to not want to publicize their results. Another possible explanation is that the strategy has liquidated or closed or experienced a significant change in management. On the other hand, it may be that the manager was acquired or merged with another firm or the strategy re-branded with a name change and is now reporting under that new name.
While a manager that stops reporting performance isn’t necessarily hoisting a red flag, in many cases further research is needed to determine the exact cause and if the information is available. Past performance is not indicative of future results, nor is it the only piece of information that should be scrutinized prior to investing.
In any event, when managers don’t report, or stop reporting performance to institutional databases, it can be important for a potential investor to dig a little deeper in their search and understanding of the manager and strategy.
Regardless of whether or not a manager publicly reports their performance information, we believe that investors should always conduct thorough due diligence on any potential investment including whether the investment manager reports data to institutional databases. If the manager does not report their performance to databases, it may be important to understand why the manager is not reporting.
We also understand that it can be difficult to dedicate the time and energy needed to thoroughly research a money manager or investment strategy that has been recommended to you. That’s why we gladly offer investors free money manager research via our Money Manager Directory.
To begin researching a money manager, simply search the manager’s name and then one of our wealth managers will reach out to you to help you dig into the strategy and validate how it would interact with your current investment portfolio.
Start researching a manager now.
Disclosures
Past performance is not indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable or equal the corresponding indicated performance level(s). This material is not intended to be relied on as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The information presented is general information that does not take into account your individual circumstances, financial situation or needs, nor does it present a personalized recommendation to you.
