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As the core of the operation of public fund products, fund managers have always attracted the attention of investors. With the differentiation of fund industry performance, a group of new fund managers with a short career have emerged. In addition to the newly hired fund managers, there are also many new faces among the fund managers appointed by newly issued funds. It can be seen that in recent years, more and more new generation fund managers have appeared and attracted the attention of investors.

It is reported that investors usually consider the experience of fund managers as one of the important factors to consider when choosing a fund. So, is there an inevitable relationship between the experience of fund managers and the performance of the fund? Nanduwan Finance reporter noticed that the latest research conducted by Morningstar (China) Fund Research Center recently showed that from the perspective of equity funds, fund managers with experience of less than 1 year have a relatively better performance; while for bond funds, bond fund managers with experience of more than three years have a more significant advantage in the ability to obtain returns.

Equity-oriented funds: Young fund managers have an advantage in obtaining returns, while senior equity fund managers are better at controlling risks.

In terms of the performance of actively managed equity funds, data provided by Morningstar (China) Fund Research Center shows that based on the rankings of similar funds in the past three years, fund managers with experience of less than one year have relatively more advantages; while based on the performance in the past five years, fund managers with one to three years of experience have performed relatively well.

Fund Manager Experience and Fund Return Performance - Equity Funds

Data source: Morningstar Direct, Tonghuashun

In terms of fund volatility, the standard deviation is used to measure fund volatility among similar funds. The lower the ranking, the smaller the fund's performance volatility. According to research data, fund managers with experience of 3 to 5 years and more than 5 years have lower standard deviations in the last three and five years than young fund managers among similar funds, indicating that senior fund managers have more advantages in controlling performance volatility.

Fund Manager Experience and Fund Volatility - Equity Funds

Data source: Morningstar Direct, Tonghuashun

"In general, young fund managers have an advantage in obtaining returns, while senior fund managers have an advantage in controlling performance fluctuations." Li Yiming, senior analyst at Morningstar (China) Fund Research Center, told reporters that using Morningstar ratings to measure the risk-adjusted returns of funds, he found that in the past three years, fund managers with less than one year of experience have performed better in Morningstar ratings, while in the past five years, fund managers with 1 to 3 years of experience have performed better in Morningstar ratings. Overall, the risk-adjusted returns of young fund managers are slightly better than those of senior fund managers.

Fund Manager Experience and Morningstar Rating Performance - Equity Funds

Data source: Morningstar Direct, Tonghuashun

So, what is the reason behind the relatively good performance of young fund managers? In an interview with a reporter from Nanduwan Finance, Li Yiming said that there are many factors that affect the performance of fund managers, such as the fund manager's industry allocation ability, stock selection ability, market style, etc. In addition, judging from the past population situation, compared with some senior fund managers, these new fund managers are relatively young and may have fewer administrative positions, so they tend to focus more on investment.

"At the same time, we noticed that among the two groups of people with less than one year of experience and one to three years of experience, some of the funds with the highest three- and five-year returns rely on heavily betting on certain industries that have performed well in the past, such as the power equipment and electronics industries in 2019, 2020 and 2021, coal and non-ferrous metals in 2022 and 2023, and media in 2023. The proportion of a single industry at certain stages is as high as 40% to 80%." Li Yiming pointed out that this investment strategy, which relies on extremely high industry concentration to win, relatively speaking, has a certain element of luck. This not only places very high demands on the fund manager's ability to grasp the industry, but the repeatability of its investment strategy also requires a longer time to observe.

In addition, Li Yiming told reporters that among these funds with high returns, the good performance achieved by some funds from 2022 to 2023 was due to the drift of their investment style towards value during these two years, which made them have a style advantage in the value stock market in the past three years. For this relatively flexible investment strategy, the sustainability of its performance lies in whether the fund manager's investment strategy can accurately grasp the opportunities brought about by style switching, which is undoubtedly a big challenge for fund managers. "From the perspective of our Morningstar research, if a relatively diversified investment strategy and a relatively stable investment style are adopted, such a fund will most likely be able to create relatively good sustained returns in the long run. For products with a high degree of concentration and some drift in style, we think it may take longer to observe the sustainability of its performance." Li Yiming said.

Bond funds: "Older managers are more experienced", and experienced fund managers have more advantages in their ability to earn returns

In terms of bond fund performance, the research conclusion shows that senior bond fund managers have an advantage in their ability to earn returns. From the perspective of long-term returns in the past five years, the average performance ranking of fund managers with more than five years of experience in the same fund category is significantly better than that of fund managers in other experience groups.

Fund Manager Experience and Fund Return Performance-Bond Fund

Data source: Morningstar Direct, Tonghuashun

In terms of risk control, although fund managers with more than 5 years of experience are not the best performing group, fund managers with 3 to 5 years of experience still have an advantage in risk control over fund managers with less than 3 years of experience.

Fund Manager Experience and Fund Volatility - Bond Funds

Data source: Morningstar Direct, Tonghuashun

In terms of risk-adjusted returns, fund managers with more than five years of experience have a higher Morningstar five-year rating than other groups.

Fund Manager Experience and Morningstar Rating Performance - Bond Funds

Data source: Morningstar Direct, Tonghuashun

"The truth that 'older people are wiser' is more evident in bond funds than in equity funds," said Li Yiming. He believes that bond fund managers with more than three years of experience will generally have a better performance in terms of fund returns, risk adjustment and income, as well as risk control than fund managers with less than three years of experience.

Fund selection "methodology": the fund's investment research team, investment philosophy, performance, etc. must be considered simultaneously

So, for ordinary individual investors, what factors should they consider when selecting funds? How can they choose the fund products that suit them?

In an interview, Li Yiming told reporters that in addition to paying attention to the investment experience of managers, he suggested that investors pay more attention to the investment capabilities of the entire company, including the capabilities of the entire company's investment research team. Judging from the past fund market, it will become increasingly difficult to rely solely on fund managers to do research and select stocks, so the support of fund companies' research teams to fund managers is very important.

At the same time, investors can also learn about the entire fund company's investment research team, including its investment research philosophy, cooperation methods, etc. through various public information, including fund company websites and some public interview reports. In addition, the overall performance of the fund company can also be used to see the overall strength of the entire investment research team.

"In addition to paying attention to the experience of fund managers and the entire team, we can also pay attention to the investment philosophy and investment logic of the fund itself, which is also very important." Li Yiming told reporters that the fund should build a more rigorous stock selection logic within its investment framework and strictly implement it. This logic needs to be able to achieve relatively good performance after undergoing a complete market cycle test. This is actually a very important link in Morningstar's fund evaluation process. According to Li Yiming, the Morningstar evaluation system is divided into two parts: quantitative and qualitative. The quantitative part is Morningstar's fund star rating, which mainly measures the fund's past performance. "In addition, we will also pay attention to the fund's fee rate. We believe that if other conditions are equal, investors should choose funds with relatively low fees, because our past research has also shown that in the long run, products with relatively low fees will also improve the fund's performance to a certain extent." Li Yiming said.

On the other hand, there is qualitative research, which focuses on the research team, investment process and fund company. "For the research team, we will analyze whether the team has the corresponding capabilities and experience to support its logic and the overall operation of the investment fund. On the other hand, in the process of analyzing the fund investment process, we will focus on evaluating whether its investment process is replicable and the consistency of the investment process and investment portfolio. For the fund company, we will evaluate whether the company is sales-oriented or investment performance-oriented, which will reflect whether it pays attention to the interests of investors. At this point, we believe that sales-oriented fund companies may issue a large number of funds at market highs, and investors may also suffer certain losses due to such behavior."

For individual investors, in addition to paying attention to fund selection, investors should also better understand their own risk tolerance and the types of products they prefer, and choose fund products that match their risks according to their own circumstances. Li Yiming pointed out that generally speaking, investors with higher risk tolerance can consider some equity-oriented fund products, while those with relatively lower risk tolerance can consider bond products or currency products.

Written by: Luo Manyu, a reporter from Nandu Wancaishe