Questions to Ask Portfolio Managers
Questions for anyone sitting across from a portfolio manager, whether you are handing over personal savings or running manager due diligence for a committee. They cover strategy, process, all-in fees, risk, drawdowns, custody, and what happens when the manager is wrong.
20 questions, each with the reason to ask it · includes a conversation guide
The questions
Open any question to see why it works.
- 1
How would you describe what you do in two sentences, without using the word alpha?
A manager who cannot compress the strategy into plain language is usually running something assembled from other people's ideas. The constraint also tells you whether they are used to explaining themselves to clients or only to consultants.
- 2
Who is your typical client, and where would my account sit in that range?
The smallest accounts in a book usually get a model portfolio and an annual call, while the largest get the manager's actual attention. Knowing which end you are on predicts your service level better than anything in the pitch deck.
- 3
What is the all-in cost of working with you, including anything I would not see on your invoice?
The management fee is rarely the whole number. Ask separately about fund expense ratios inside the portfolio, trading costs, platform or custody fees, performance fees, and any revenue the firm receives from products it selects.
- 4
Are you a fiduciary on everything you advise on, and will you put that in writing?
Some firms act as a fiduciary for advice and as a salesperson for products in the same meeting. Hesitation about writing it down is the answer. A clean yes should also survive the follow-up question of whether any commission exists anywhere.
- 5
Walk me through how one current holding got into the portfolio, from first idea to final size.
Asking about a real position rather than the process in the abstract exposes whether there is a process at all. Listen for who sourced it, what research was done, who approved it, and how long the sequence took.
- 6
How do you decide how much to put in any one position?
Position sizing is where discipline either exists or does not. An answer built only on conviction means sizing is a mood. Look for a stated rule and then ask what the largest position has ever been relative to that rule.
- 7
What would make you sell something you own today?
Sell discipline is the weakest part of most processes because buying is the fun part. A strong answer names a broken thesis or a specific trigger. A weak one is a price target, which is a prediction rather than a rule.
- 8
Which benchmark do you measure yourself against, and who chose it?
Managers often pick the benchmark that flatters the strategy, then quietly change it after a bad stretch. Ask whether the benchmark has ever been switched, and what the record looks like against the old one.
- 9
What was your worst twelve-month stretch, and what did clients do during it?
Every strategy has a drawdown pattern, and you want to know its shape before you live through it. The second half matters more: a manager who saw heavy redemptions at the bottom may have been forced to sell for other people's reasons.
- 10
Tell me about a decision you got badly wrong and what changed afterwards.
The useful answer is specific, names the position, and describes a process change rather than a lesson about patience. Vagueness here, or a mistake that turns out to be about someone else, is the tell.
- 11
How much of your own money is in this same strategy?
Co-investment is not a guarantee of skill, but the number and the reason behind it are informative. A manager whose personal money sits in a different, more conservative strategy is telling you something about the one being sold.
- 12
What is portfolio turnover, and what does that do to my tax bill?
Pre-tax returns are the only ones most managers quote. In a taxable account, high turnover can consume a large share of any outperformance, so ask whether they manage around holding periods and whether they harvest losses.
- 13
Which risks are you deliberately taking, and which are you deliberately avoiding?
This forces a manager to name concentration, leverage, illiquidity, currency, and sector exposure out loud. Someone who answers only with volatility statistics is describing measurement rather than judgment.
- 14
Do you use leverage, derivatives, or illiquid holdings, and for what purpose?
The purpose matters more than the presence. Hedging and return-seeking use of the same instrument behave very differently in a crisis. Also ask what happens to the illiquid portion if you want your money back in a bad month.
- 15
Are you willing to hold cash, and how much have you held at the extreme?
Some mandates forbid it and some managers cannot bring themselves to do it. The historical maximum tells you whether cash is a real tool here or a line in the brochure, and it explains part of the drawdown record.
- 16
Who else touches this portfolio: analysts, a committee, an outside model provider?
You are trying to find out whether you are buying one person's judgment or an institution's process. Both are workable, but they carry different risks, and firms often blur the two when marketing.
- 17
What happens to my account if you retire, leave, or the firm is sold?
Succession is the failure most clients never plan for. Ask whether a written succession plan exists, who would take over, and whether a sale would trigger a change in fees, custodian, or the strategy itself.
- 18
Who holds the assets, and how do I verify my balance without going through you?
Custody separate from management is the structural protection against the worst outcomes. You want an independent custodian, statements sent directly to you, and the ability to log in yourself. A manager who produces the only statement is a problem.
- 19
Have you or the firm had any regulatory, disciplinary, or client complaint matters?
Ask before you look, then look anyway through public registration records. The gap between what was disclosed in the room and what is on file is more informative than the underlying item.
- 20
What would tell me it is time to fire you?
Managers who have thought seriously about their own failure conditions can name them: a style drift, a period of underperformance longer than their process should produce, a departure of key staff. Anyone who says there is no such scenario has just answered a different question.
Evaluating a portfolio manager
Practical guidance for the conversation itself.
Before the meeting
Before the meeting
- 1Write down what the money is for and when you need it. Most bad manager fits are really mismatches between a strategy's horizon and the client's.
- 2Look up the firm and the individual in public registration records, and bring anything you find to the meeting rather than saving it.
- 3Ask in advance for the fee schedule, the form disclosing conflicts and services, and a sample statement. Reading them beforehand turns the meeting into follow-up questions.
- 4Decide which two or three questions you most need answered. Manager meetings run long and the important question is often the one that gets cut.
- 5If a committee is deciding, agree in advance who asks about fees, because it is the question that most often goes unasked in a group.
Reading the answers
Reading the answers
- Specific dates, position names, and numbers usually mean the manager is describing what happened rather than what they believe about themselves.
- A sell rule that only exists as a price target tends to produce holding on the way down and selling early on the way up.
- If performance is always explained by the market when it is bad and by skill when it is good, attribution is not being done honestly.
- Willingness to name the kind of client they are wrong for is a better sign than a claim to suit everyone.
- Watch what happens when you ask a question they have not been asked before. Composure under an unscripted question is most of what you are hiring.
Warning signs
Warning signs
- Statements or performance reports produced by the manager rather than an independent custodian.
- Returns described as steady or uncorrelated with no year that looks bad.
- Reluctance to give a single all-in cost figure, or fees quoted only in basis points when you asked for dollars.
- A benchmark that has been changed, or one you have never heard of.
- Pressure tied to a closing date, a capacity limit, or an allocation that will not be available later.
- Anything about the strategy that cannot be explained twice the same way.