The 4 P’s of fund selection: what to look for when considering a fund manager

I’ve previously written in detail about ways to become an entrepreneurial investor. One of those ways involves understanding best practices for picking winners. There are so many choices and options when it comes to funds, one must be careful not to get caught in a paralysis from analysis.

Claudia Roering, head of Fund Selection at Deutsche Asset Management, very succinctly sums up the goal in picking funds: “Fund selection is about creating alpha by selecting the best funds and managers that deliver excess returns over a complete business cycle.”

Alpha is essentially the risk-adjusted difference that a fund manager makes on the value of a fund.

There are four areas which I look at when considering fund managers:


Some questions to consider in evaluating the strength and consistency of a fund manager are: Who is in charge? What are the ownership levels of the principals? How stable is the team, how do they work together? A strong team approach lends itself to a measure of stability in that the loss of one individual would not drastically impact fund performance negatively.


Roering said that her team would “want to understand how the manager will perform in various market environments, and that comes down very much to the investment process, which is something we focus most of our analysis on. This is really the core of our qualitative due diligence.”

How disciplined is the team to implement their investment process? What is that investment process? Can it be easily defined? Why will their approach result in future outperformance in the near and long future?


Short-term performance is commonly evaluated and hastily acted upon. Selecting a fund which had high recent performance often leads to a pick which will underperform in the next period. Likewise, leaving a fund for a few months of underperformance, barring anything severe, is a waste of the due diligence which should have been put in to select the fund in the first place. Thus, the best strategy is to put in the effort upfront and develop a thorough understanding of a fund manager and invest in them for a prolonged period of time.


Products are about eligibility based on specific investment criteria, but these criteria must be determined by the overall strategy. Roering cites an example of this saying, “I’d be willing to accept a higher fee for an emerging markets debt fund than a developed bond fund. So it depends on the alpha potential of the asset class.”

Also, she says that “fund size varies with the strategy of the fund. For instance, a large cap strategy can comfortably manage several billion dollars in assets under management, while a small cap strategy will likely have problems finding opportunities for growth with billion-dollar assets.”

The bottom line is there is no magic bullet to any type of entrepreneurial investing. But, the more you understand about the process — and the inner workings of those with whom you’re investing — the wiser you become.

John Kahl finds the formula of product, people and partners adheres to success for ShurTech

John Kahl is fond of telling the story of how ShurTech Brands LLC’s iconic Duck® tape helped him lure a sales representative away from a competitor by making that competitor’s more affordable cost irrelevant.

“When the salesman left his organization, he said, ‘You guys were tough to beat. You did a masterful thing with that little yellow duck and branding duct tape with a K. Even though I was the cheapest guy on the block, I couldn’t knock you out,’” Kahl says.

The marketing coup was no accident.

“In a world where we’re becoming so transparent on price, there has to be a reason why you’ll drive past one location to go to another or why you will go online or to a physical store versus the other options that are available,” says Kahl, the company’s CEO. “We try to create those differences on behalf of our customers.”

ShurTech has plenty of chances to meet that goal with nearly 3,000 products in its line.

“Several hundred of them are Duck® tape, or Duck® tape related,” Kahl says. “But we have a broad offering of products that go well beyond that.

“But it’s most notable — particularly since the little yellow duck started on Duck® tape — for that product,” Kahl says.

Duck® is an umbrella brand that includes painting tapes, package sealing tapes and various DIY-type products, whether it is weather stripping to insulate homes or shelf liners.

While ShurTech doesn’t disclose financial data, Kahl says the company has a meaningful midmarket presence. ShurTech is a division of Shurtape Technologies LLC, headquartered in North Carolina. Since 1997, sales have quadrupled and Shurtape’s global presence is booming. Shurtape is operating in the U.S., Canada, Mexico, Peru, United Arab Emirates, Germany, the United Kingdom and China.

Manco T. Duck first appeared on packaging in 1984, and within four years, sales of the tape skyrocketed. Created by a former Disney artist, the character helped exemplify the corporate culture and commitment to be fun, imaginative and resourceful. That naturally led to tape of wildly different colors, cartoon characters, sports team logos — and even pink tape with a bubble gum scent.

That’s just one example of what a company can do to differentiate its product from its competitors, Kahl says.

To create those differences, ShurTech focuses on product, people and partners. Here’s how he makes it all stick together for ShurTech’s 1,200 employees in its B2C and B2B divisions.

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How to protect your company’s product when entering new markets

Michael J. Ioannou, partner, Ropers Majeski Kohn & Bentley

Michael J. Ioannou, partner, Ropers Majeski Kohn & Bentley

Trademark, copyright and intellectual property (IP) laws can vary greatly in foreign markets, so it’s vital to seek local legal expertise before doing business internationally, says Michael J. Ioannou, a partner at Ropers Majeski Kohn & Bentley.

“Local law firms know the system, including the politicians and judges,” Ioannou says. “It’s no different than doing business here. If a Florida company has a problem in San Jose, they could send someone, but they would most likely hire an attorney here. It makes sense to have someone like me who has practiced law here for 32 years and worked in the local courts.”

Smart Business spoke with Ioannou about how companies can avoid legal problems when expanding into foreign markets.

What are some important issues to consider before entering a foreign market?

From a general standpoint, you need to understand the business environment. You can accomplish that in India, for example, through the National U.S. India Chamber of Commerce, Confederation of Indian Industry or the National Association of Software and Services Companies, which caters to high-tech companies.

You also should be checking local laws with the help of a local lawyer in the country or near where you want to do business. So, if you’re going to mainland China, there are good attorneys in Hong Kong that can advise you or connect you to counsel in mainland China that they know well.

What mistakes do companies make when doing business overseas?

They might rush into a market without checking other companies’ rights and get sued for infringing IP rights in the foreign country. Apple thought it had acquired rights to the iPad trademark in China from a Taiwanese company, but courts said a subsidiary of that company still owned the rights in China. Apple paid $60 million in a court-mediated settlement. So one route is to buy the trademark, but you still have to ensure that what you’re buying is legitimate.

It’s the same situation with foreign companies coming into the U.S. A client with a chain of Indian restaurants wanted to expand here and found a restaurant on the East Coast that used the name in interstate commerce first — that’s the test for trademarks, first use — but the restaurant didn’t have the trademark registered. Instead of spending money to argue in federal court that the restaurant didn’t have first-time use, the client bought the restaurant and trademark. It was cheaper than paying legal fees in a later dispute over the name.

How can businesses protect themselves from legal problems?

When entering a country, you want to secure trademark rights for your product there. If you can, obtain patent protection, register and apply for a patent in China or India, for example. A patent in the U.S. is not enforceable in India or China. You can stop someone from shipping goods into the U.S. that infringe on a patent here, but you can’t stop a sale occurring in India or China based on a U.S. patent.

Pharmaceutical companies are having problems getting inventions patented in India because there’s a huge market there for generic drugs. India doesn’t even recognize software patents. One client in India was threatened by a U.S. company for IT support services offered here. It was a U.S. patent, so as long as the function that was within the patent claim was being done in India only, the U.S. company couldn’t claim infringement.

What can companies do to fight patent infringement?

In India, for example, you could file a lawsuit in civil court, but that could take 15 years to reach a resolution. However, the entity that’s infringing laws in India may be doing business in the U.S., which would provide another angle to file a lawsuit here for unfair competition. You also may be able to intercept their goods from coming into this country, depending on the nature of the IP rights being infringed.

But if you have a counterfeiter in Shanghai that’s only selling goods there, you have to use the local courts. Things are getting better in terms of that kind of infringement — that’s why you’re seeing a lot more activity to enforce rights in China, for example. Just be cognizant that you can’t expect a perfect day in court as a foreign company coming into these jurisdictions.

Michael J. Ioannou is a partner at Ropers Majeski Kohn & Bentley. Reach him at (408) 287-6262 or [email protected]

Learn more about Michael J. Ioannou.

Insights Legal Affairs is brought to you by Ropers Majeski Kohn & Bentley PC

Procter & Gamble CEO defends plan at staid shareholder meeting

CINCINNATI, Tue Oct 9, 2012 – Procter & Gamble Co.’s CEO stood behind the company’s plan for increasing profit and sales at a drama-free annual meeting notable for the absence of William Ackman, the activist investor who has pushed hard for change in recent months at the world’s largest maker of household products.

Chief Executive Bob McDonald defended the strategy of developing major new products while the company at the same time seeks to cut $10 billion in costs.

Tuesday’s meeting, held in P&G’s hometown of Cincinnati, came as something of a respite for McDonald months after Ackman’s Pershing Square Capital Management took a stake in P&G, putting pressure on the CEO and the board to improve performance.

McDonald, who has been at the helm since July 2009, is refocusing on core categories, countries and innovations with both the $10 billion restructuring and a strategy laid out in June that homes in on the company’s 40 biggest businesses, 20 biggest new products and 10 key developing markets.

Ackman, who disclosed his stake in the maker of Tide detergent and Crest toothpaste too late to have any proposals on the agenda, was not in attendance, and only one shareholder referred to him, asking why it took the investment of an activist to boost P&G’s stock.

“If we remain focused on the plan I talked about, the 40/20/10 plan, with improved innovation from discontinuous innovation, with productivity improvement, then we are all convinced that shareholders will get an increase in value and the stock will reflect that,” McDonald replied, without mentioning Ackman directly. “We are focused like a laser, we are holding our own feet to the fire to do this.”

Apple expected to unveil applications to take on Google

SAN FRANCISCO, Mon Jun 11, 2012 – When Apple Inc. kicks off its annual conference for software developers on Monday, all the power players in the Apple universe will be on hand, save the one that is in many ways driving the agenda: Google Inc.

More than ever, the consumer electronics juggernaut finds itself in a pitched battle with the online search giant – in smartphones, cloud computing and the never-ending competition for the hearts and minds of the best software developers.

Apple on Monday is expected to announce its own mapping application, challenging the position of Google Maps as one of the most-valued features on the iPhone. It will unveil closer integration of its iPhone apps and iCloud storage service with all its devices, the latest riposte in its battle with Google’s Android smartphone software.

It may promote the latest in Siri, the voice interface that the company thinks can continue to set the iPhone and the iPad apart from the Android pack.

And there will likely be a new line of Macintosh laptops too – underscoring the leverage that a full line of hardware products can bring to what is mainly a software war with Google.

Apple is looking to differentiate its mobile devices from Google’s Android by further enticing consumers deeper into its app ecosystem, said Carolina Milanesi, analyst at Gartner Research.

“It’s all about loyalty and basically leveraging the opportunity of selling more to them,” she said. “I don’t think the consumers in the mass market are necessarily tied into the Android ecosystem in the same way that consumers on the Apple side are.”

Battling in many arenas, the rivals employ different weapons. Apple’s vise-like grip on its ecosystem – with the closely managed app store and its seamless integration with the hardware – stands in sharp contrast to Google’s free-for-all approach.