One of the risks often overlooked by active investors is the key person risk. This is the risk that the key person or people behind the investment approach leave the company who are managing your money. It is also a risk for DIY investors, the risk being that you suffer an ailment or illness which leaves you impaired from making sound investment decisions.
An example of that risk is being dramatically covered in today's media in relation to the 452 Capital fund management business. In what appears to be a tragic set of circumstances the management of this high profile investment firm has all but disintegrated. Refer to Elizabeth Knight's article published by the Sydney Morning Herald - Next step uncertain for 452 Capital.
This must provide a lot of uncertainty for investors in funds offered by 452 Capital.It also reminds all of us about the key person risk when applying an active management approach to investing.
The approach favoured by this firm takes this risk off the table.The investment approach we recommend our clients use is not based on a key person or team of people deciding which companies to invest day by day.Instead, the managers we favour apply whole of market approaches based on well tested academic research.
If you are interested in finding out more about this approach please take a look at our Building Portfolios page or get in touch to request further details.