New Book Guides Investors On How To Survive And Thrive In Funds Jungle

Tom Burroughes

12 November 2012

With even the most seemingly tame index fund or other plain vanilla investment vehicle, the need to carry out full checks to protect clients from mishaps and fraudsters is essential, argues the author of a new book.

Jerome Lussan, who has spoken in the past about good governance and investments at a conference organised by this publication’s parent firm, is the author of the Financial Times Guide to Investing in Funds: How to Select Investments, Assess Managers and Protect Your Wealth: How to Generate Wealth and Protect Your Money (The FT Guides). Lussan is also chief executive of Laven Partners, a firm for consultation and advice about such issues.

The book, which was published earlier this summer, explores the analysis and procedures investors and wealth advisors should be aware of and put in place. Lussan is determined that episodes such as the Bernard Madoff scam, and lesser crimes, are not allowed to fade into distant memory. And even where criminal activity is not involved and failings occur due to lax controls, he wants the industry to sharpen up its act.

Lussan started on the project to write this book in May 2009, according to his earliest recorded notes. His concern was that, in many comments about the financial crisis and the blowups that occurred, people were not giving sufficient attention to the processes and operational side of fund management.

“Due diligence is a fundamental part of investment manager selection,” he told WealthBriefing in an interview about the book. In all too many cases, the checks and scrutiny that should be put on fund managers and their firms is secondary to issues about performance, he said.

“None of this is really rocket science and everyone can learn from the book,” he said of the publication, which runs to 240 pages.

“The book is written in a style readable by anyone interested in fund managers or who is in the course of choosing a fund manager,” he continued. Since it was issued in June, the book has already sold several hundred copies despite there not being a marketing drive, until now.

“In future, I’d like to provide a revised version of the book and continue to fight for change to the financial modelling we have today. We keep thinking that this business is all about mathematics and market performance without factoring in the importance of reliable and verifiable investment processes that are backed up by strong risk management and a strong middle office,” Lussan said.

The investment industry remains strongly focused on returns and how to beat a market in much of its promotional literature and associated commentary, and perhaps that is understandable when, in a world of poor cash rates and volatile markets, investors are hungry for performance. But as Lussan argues, there are important risks to consider, such as losing it all due to carelessness or worse.