Within the investment world, there is a figure that has stood out over time: fund managers. In a nutshell, this is the person in charge of deciding in which assets to invest the resources obtained in an investment fund in order to obtain the best yields.
In addition, this is usually done by following basic guidelines that have been established beforehand when creating the investment fund in question. Thus, each investor can choose the best fund managers not only on the basis of the returns obtained, but also on other parameters such as the assets invested in or the risk to be assumed.
Fund managers as a key figure in the investment process
One of the best-known fund managers in recent decades was Benjamin Graham, who is said to be the father of value investing, and whose pupil is now hailed by many as the best manager of all: Warren Buffett. However, there are other great figures such as Peter Lynch, Philip Fisher, John Templeton or Carl Icahn who have achieved great returns by amassing great fame.
However, managing to invest in the funds of these reputed managers was not only very complicated, but also expensive and at times risky. Despite that, investing in other funds, whether author funds or more generic ones, was also expensive and no less risky. In fact, on very few occasions did the funds beat the market and on top of that they charged a huge commission, a problem that still continues. This was one of the triggers for the arrival of passive investment and its subsequent explosion as a form of alternative investment.
A new evolution: the new best fund managers
However, a new revolution in 2008 would change the figure of the fund manager, which until now had not been questioned. Thus, with the global crisis, many investors did not want to pay the high fees charged by many funds with managers and just indexing to an index was not satisfactory because many markets were collapsing. The solution was roboadvisors, as they ensured the creation of balanced portfolios while their prices were very low.
Thus, in 2008, the firm Betterment, founded in New York, opted for this type of fund manager that creates automated portfolios for its clients. More than 15 years later, these types of fund managers have proliferated so strongly that they threaten to take over most of the global investment market.
What is a roboadvisor?
A roboadvisor is an automated investment manager, i.e., a digital platform that offers investment portfolios in an automated way based on the customer’s preferences and risk aversion at a reduced price. In addition, the algorithms behind it also take care of optimizing and managing capital through what are known as portfolio rebalancing.
In some cases, however, the technology is completely autonomous. Normally, the algorithms that choose and optimize portfolios are supervised by financial experts, who are in charge of both choosing the models to be followed by the algorithm and calibrating them.
The technology behind a roboadvisors
Roboadvisors are always talked about as managers who offer portfolios in an automated way. But what is behind them, and how do they achieve their results? The answer is the algorithms and how they are configured. First, every algorithm needs some parameters to start the process, for which it requires a questionnaire. Basically, we are telling it what we want to achieve (profitability), what we don’t want it to do (risk) and what we have for it (economic situation).
Once the algorithm obtains that information, it ejects the portfolio composed of index funds and/or ETFs with which it believes it complies with the above. This is where the algorithm configuration comes in, which usually follows some financial mathematical formulas, among them: Markowitz’s Modern Portfolio Theory (used, for example, by Betterment), Fama and French’s factorial investment framework or the APT factorial decomposition (by Black Litterman). All these form the modeling and calibration of the algorithm and are chosen and checked by experts.
Aspects of choosing the best fund managers: advantages of roboadvisors
Roboadvisors bring together some of the most crucial aspects that investors look for when they want to find the best managers for their savings:
- Low commissions: passive management and automation allows you to reduce commissions to a minimum.
- Minimum investment: the initial contribution is within everyone’s reach, you only need between 500 and 1,000 euros.
- Diversification: by investing in many funds and/or ETFs, you avoid large losses.
- Transparency: you always have clear information about the investments made. In addition, they are regulated by the CNMV.
- Advice and support: the same experts who calibrate the algorithms are in charge of monitoring, rebalancing and supporting your investment.
How to select the best fund manager (roboadvisor)?
When choosing the best roboadvisor there are many things to consider, but they can be summarized as follows:
- Track record: the years in the market, the awards achieved or the users who already trust the roboadvisors in question are vital elements to take into account before deciding one or another. A good example is inbestMe, since it is one of the most experienced platforms in the market.
- Transparency: this is a fundamental characteristic of this type of product, so the platforms that comply with it flawlessly always have an extra point when it comes to selecting them.
- Products: a broad portfolio of products in which to invest is very important, since future profitability (and also diversification) basically depends on it. However, it is not only about index funds or ETFs, but also about different options such as savings portfolios, SRI (socially responsible) products, pension plans or any other option.
- Commissions: if roboadvisors have conquered the market, it is because their commissions are low, therefore, it is essential to carefully study the costs of their products and choose the one that is most competitive. But don’t just look at the commissions, as there are platforms that are somewhat more expensive (just a few hundredths), but with better services.
- Level of service and customer support: having a human team behind you is a factor to take into account. After all, behind so much technology, you need that human factor to help the customer when needed and make their experience more friendly.
inbestMe, the ideal platform for managing your funds and more
One of the platforms that best brings together all the key aspects of a roboadvirsors is inbestMe. Firstly, because of its track record and transparency, as it has been in operation since 2017 and has not stopped growing since then. In addition, in 2019, the digital magazine Acquisition International Magazine gave it the award for Best Independent Automated Portfolio Manager of 2019. An award that recognized the good work of the platform, which has also not stopped growing and increasing the number of products it has for its users. In fact, in recent years it has been adding SRI (socially and environmentally responsible) products, a savings portfolio or pension plans.
Finally, inbestMe is attractive not only because of its low costs, but also because of its fee structure. The platform sets levels so that as each user includes more assets, he or she pays lower fees. This policy has a doubly positive effect: in the long run, it is a double gain, as it encourages users to accumulate more capital (which is good for their future), while paying less (which improves profitability).
All in all, if you’re looking for the best fund managers to start growing your savings, you should get on inbestMe and start investing with their strategy now. It’s the best way to prepare for the future.
