You May Be Able to Get Manager’s Answers to Questions--Indirectly

Fund managers talk to a lot of people.

Most discuss the market with newsletter editors, their investment strategy with money managers and financial planners, and virtually anything with the media. They are happy to gab with almost anyone who can help bring in the money.

Anyone, that is, but you, the investor.

Don’t take it personally. Fund managers must use their limited appearance time on what brings in the most dough.

But your lack of access also raises a problem. Clearly, professional investors talk to the fund guys because it helps them get a better sense of what a fund can do.

You need those questions answered too.

Says Eric Kobren of Insight Management, a Wellesley Hills, Mass., investment firm and newsletter publisher: “Talking to a manager gives you a feel for their style that goes beyond the numbers. That helps you develop conviction in the fund, and that is what you want before you invest or when you decide to sit tight.”

Most ordinary investors don’t demand access to their fund managers, figuring it’s unreasonable to ask for it.

Yet fund companies are increasingly providing access, albeit indirectly, in ways that savvy investors can tap into.

Those range from taped interviews on telephone hotlines (Founders, Montgomery, Heartland, Robertson & Stephens are among the firms offering them) to Internet interviews and souped-up newsletters.

Many fund groups--Putnam, GT Global and Fidelity’s institutional arm among them--offer taped interviews that financial advisors can listen to. That advisor can play the tape for you and pass your questions to the fund company.

“It’s not unreasonable to expect a fund company to answer questions,” says Kurt Cerulli of Cerulli Associates, a Boston-based consulting firm. “The answers might not come directly from the manager--and may not be as detailed as you want--but any fund that wants your business should respond to you.”

Here are some good questions for a manager:

* What’s your investment philosophy, in plain language?

Prospectuses and fund literature are vague. A manager can claim the growth or value style, but those terms do not really articulate his or her investment ideology.

A “momentum investor” buys hot growth stocks, for example, whereas a more classic growth investor is looking for companies with great prospects in strong industries.

* How do you select stocks?

Find out if a manager picks stocks from the bottom up, looking first for great companies and then considering economic conditions, or from the top down, looking at the big picture to decide which industries to pursue. (With top-down managers, you will want periodic updates on the way they perceive the economy.)

Ask, too, if the manager actually talks to or visits companies. You’ll be surprised at the number of managers who invest from an ivory tower rather than go out and kick the tires. You may also be surprised at how well they can do from the tower.

* What is your worst nightmare for this fund?

Listen to this one carefully. A manager worried about earnings surprises may have not done enough legwork; one afraid of investors bolting during a downturn could have a combination of too many volatile issues.

You want a manager who eats, breathes and lives the fund during the day but sleeps like a baby at night.

* How big a bet can or will you make in sectors and industries?

Find out whether a manager balances the portfolio or bets on industries with potential. Then find out which sectors he or she likes the most--or is avoiding--now.

* What determines how much cash you will hold?

There is one ideal answer: The fund is fully invested to the extent that it can find suitable stocks. A manager who plays extensively with the cash portion of the portfolio is timing the market--probably not what you’re paying for.

* What prompts turnover in your fund’s holdings?

You can find out the fund’s average turnover rate from the prospectus, but you’d like to know more.

Statistically speaking, a fund can have 100% turnover if it sells everything in the course of the year or if it maintains core holdings and trades actively around the edges. The difference becomes clear in your tax bill, so ask if the manager keeps tax efficiency in mind.

* Do you invest in your own fund?

You can’t expect managers to put their entire nest egg in one basket, but they certainly should have something in their own fund. Don’t trust anyone sitting behind the wheel of an investment vehicle who says “come along for the ride” but won’t buckle his family into the back seat.

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Charles A. Jaffe is mutual funds columnist at the Boston Globe. He can be reached by e-mail at jaffe@globe.com or at the Boston Globe, Box 2378, Boston, MA 02107-2378.