How to Choose the Right Fund Manager in Australia

Selecting the right fund manager is one of the most important financial decisions you will make. A strong manager protects capital during downturns, grows it with discipline, and communicates clearly through uncertainty. A manager without a repeatable process introduces unnecessary risk and produces inconsistent results across market cycles. This guide explains how to evaluate a fund manager in Australia using a structured approach that focuses on the 3 Ps: Performance, Process, and People.

Why the Fund Manager Matters

Fund managers control how your capital is allocated, how risks are managed, and how consistently your long-term goals are supported. In Australia, there are hundreds of managed funds across Australian equities, small companies, absolute return strategies, and income-focused mandates. With so much choice, investors need a clear way to separate disciplined managers from those who rely on favourable conditions or short-term market momentum.

Morningstar research has shown that consistent process and team stability drive better long-term results than one-off high-return periods. This is why evaluating the quality of the manager is more important than chasing short-term outperformance.

The 3 Ps Framework for Evaluating a Fund Manager

Performance: How the Manager Has Delivered Results

Performance is more than high returns. It reflects how the manager behaves in different market conditions, how they manage risk, and whether the performance aligns with your own financial goals.

What to look for:

• Consistent results across full market cycles
• Strong risk-adjusted returns
• Low drawdowns relative to benchmarks
• Alignment between past performance and your goals

Consistency is important because a one-off strong year says less about skill and more about favourable market dynamics. Investors should review multi-year data and understand how the manager performs in both rising and falling markets.

Case Studies: Afterpay and SiteMinder

Datt Capital’s decisions on Afterpay and SiteMinder highlight how a disciplined process supports long-term performance. Afterpay was first added near seven dollars a share, driven by clear evidence of structural growth and strong product adoption rather than market sentiment. In 2025, the team increased its position in SiteMinder during a thirty percent drawdown, recognising the strength of its recurring revenue model and the critical role its software plays for hotels. As Emanuel noted in the AFR, the company’s customer base is both loyal and deeply integrated, which reinforced conviction during volatility.

Process: How the Manager Makes Decisions

Process determines whether performance is repeatable. A strong investment process is transparent, documented, and tied to a clear investment philosophy.

What to look for:

• Clear investment style, such as growth or value
• Defined research process and selection criteria
• Disciplined risk management practices
• Jargon-free communication about decisions
• A distinct edge supported by evidence

Investors should understand how the manager identifies opportunities, manages risk, and adjusts the portfolio as conditions change. A manager who can explain their process clearly is likely to deliver consistent results.

People: Who Is Making the Decisions

People drive performance. A stable, experienced investment team with deep domain knowledge is one of the strongest predictors of long-term outcomes.

What to look for

• A core team that has worked together for many years
• Low turnover within the investment team
• Managers who invest their own capital in the fund
• A culture that prioritises investors
• Evidence of experience in specific sectors or strategies

Alignment is critical here. Managers who have personal money invested in the fund have stronger incentives to manage risk responsibly.

Additional Criteria to Consider

Fees and Costs

Fees matter, but cost should never be the only deciding factor. Investors should understand the fee structure, including management fees, performance fees, and operational expenses.

What to consider:

• Is the fee structure fair
• Is performance fee charged only after genuine outperformance
• Does the fee model reward long-term value creation

Operational Strength

Strong operations support the investment strategy and protect investor capital.

What to check:

• AFSL licensing
• Independent custodian and administrator
• Clear liquidity terms
• Robust compliance and risk oversight

Operational quality reduces administrative errors and reinforces the integrity of the fund.

Steps to Choosing the Right Fund Manager

1. Define Your Needs

Before assessing managers, understand your own risk tolerance, financial goals, income needs, and investment horizon. This prevents misalignment and sets clear expectations.

2. Build a Shortlist

Review a broad range of Australian fund managers across Australian equities, absolute return funds, small companies funds, and other relevant categories. Avoid limiting your search to personal recommendations alone.

3. Ask Tough Questions

Ask managers about their investment style, team stability, risk controls, drawdowns, capacity limits, and fees. Avoid vague or marketing-heavy answers and look for clear evidence that supports their claims.

4. Look for Alignment

Choose a fund manager who invests personal capital in their own strategy. This ensures their interests are tied to your outcomes.

5. Monitor Continuously

Due diligence continues after you invest. Review performance reports, monitor changes in the team, assess communication quality, and reassess whether the fund continues to suit your objectives.

Why Alignment Matters Most

Alignment reinforces discipline and reduces the risk of poor decision-making. Managers who invest their own money have stronger incentives to manage volatility, protect capital, and make decisions based on long-term results. This structure benefits investors seeking more stability in Australian equities or diversified portfolios.

Conclusion

Choosing the right fund manager requires careful evaluation of performance, process, people, costs, and alignment. The most reliable managers demonstrate consistency, transparency, stability, and a clear investment philosophy that aligns with investor goals. By focusing on the 3 Ps and following a structured review process, investors can make informed decisions that support long-term success.

If you want to understand how a research-led, alignment-focused investment approach works in practice, explore the Datt Capital fund range or contact our Head of Distribution, Daniel Liptak, at daniel@datt.com.au for further information.