Writing effective fund commentary is an art. Sure, it relies heavily on cold, hard data, but turning those swirls of statistics into something elegant, concise and, above all, clear requires a precise mix of discipline and inspiration.
At Copylab, we’ve written a few fund commentaries in our time, so here’s our guide to bringing out the best in these unsung but crucial documents:
- Creative word choice Mix up your vocabulary and raid your mental thesaurus (or a physical one for those moments when the creative juices aren’t flowing) for some more imaginative choices – but within limits, of course. Too often, words such as strong, challenging, driven and exposure are repeated on the page. Instead, consider the following alternatives:
- Strong (October was another period of strong performance):
- robust, excellent, impressive, notable, resilient, vigorous, weighty, effective, helpful, potent, durable
- Challenging (it was a challenging period for emerging-market currencies):
- difficult, testing, demanding, tough, taxing, onerous, arduous, gruelling, hard, burdensome
- Fell (equities fell over the period):
- declined, depreciated, decreased, tumbled, weakened, collapsed, dropped, retreated, reversed
- Rose (the US dollar rose against the euro):
- appreciated, climbed, strengthened, grew, improved, increased, gained, soared, surged, rallied
- Driven (relative performance was driven by our holding in UK government bonds)
- led, helped, boosted, enhanced, supported, fuelled, strengthened, improved, held back, hindered, hampered
- Exposure (we increased our exposure to US equities):
- portion of the portfolio, allocation, investment in, holdings*, positions*
*words best used in equity commentaries, but to be avoided in bond-fund reports
But having said all that…
- Ordinary, simple wording is still best Keep your writing concise and unfussy while avoiding the ultimate sin of using jargon. It can infuriate, alienate and bewilder the reader. The arguments against using such words are well documented elsewhere, but suffice to say: avoid them. Similarly, shy away from using vague or meaningless terms like optionality, dynamic and shareholder value. FT columnist Lucy Kellaway repeatedly bashes the use of the word value, and with good reason. In different contexts, it can have a number meanings and yet none are specific: a fund manager’s value bias (preferring to invest in relatively ‘cheap’ stocks, for example) is more forgivable, but the word also conjures up notions of fluffy principles on one hand, and quantifiable worth, returns on investment, earnings and share-price movements on the other. Use with caution.
- Performance – absolute and relative While asset managers typically report on relative performance to demonstrate how they add ‘alpha’ and compare with industry peers, the end customer is most often concerned with the absolute return: how much money have I made/lost? This is particularly important when funds lose money. If an index falls 25% over the year while the fund declined ‘just’ 20%, mentioning outperformance is fair enough. Just refrain from bragging too much – the customer, who placed their generous faith and trust in the fund, just lost a fifth of their investment.
- Years, quarters, months – get your timing right Be careful that any information released between the period’s end and time of writing is not included. Always attribute performance to events occurring during the review period. Using the impact of Steve Jobs’s death (5 October 2011) to explain Apple’s share-price fall in September 2011, would not only be an insensitive embarrassment, but also incorrect.
- Language – use correctly in bond-fund commentaries A frequently made mistake is importing equity-style wording into fixed-income commentaries. While bond and equity prices can rally, yields do not – instead they rise or fall and spreads contract or widen. Stock selection is another piece of equity terminology that shouldn’t creep into bond-fund commentaries – security and issuer selection are infinitely preferable. Similarly, the words holding and position can also be misleading in the context of fixed-income investments, as they typically don’t indicate whether you are referring to an individual line of issuance, or to the issuer itself; using terms such as the issue and exposure provide much greater clarity.
- Audience understanding is key For your fund commentary to have any use or purpose, the reader must understand it. Distinguish between big institutional clients, professional advisers and the average ‘Joe Bloggs’. Also, appreciate the huge variances within each of these categories. Write reports, therefore, in the most inclusive manner possible. A cut-and-paste job between institutional and retail clients should never be the default. While an explanation of credit-spread duration** might sound condescending to large-scale pension investors, to financial advisers it might serve as a helpful reminder – and to the retail audience it may be too unnecessarily complex to include at all.
**measures a security’s sensitivity to credit-spread movements
- Before submitting your commentary Ask the fund managers for their review to ensure your writing is aligned with their thoughts. While writers may be able to concoct numerous reasons for purchasing a new holding, for example, it is impossible to pinpoint the specific rationale without an open dialogue and ensuring that your final report reflects this. Proofing by peers is equally important – it’s not only an essential way of picking up any mistakes, but also an excellent learning tool for new and experienced writers alike.