Many investors and fund management companies are united in their desire to find a particularly elusive individual: the star fund manager. So elusive is their quarry that a sub-industry of researchers and analysts has developed over the years to support this quest. Investors that choose actively managed funds want to find an individual who can generate better returns than the market over prolonged periods of time, while asset managers understand this desire and want to attract the money that follows it by promoting their fund managers and key members of their investment teams. “We are a people business” and “it is our people that sets us apart” are popular refrains from fund companies.

The desire to find a star fund manager is understandable, both commercially (it makes money for fund companies and, if one is found, investors) and philosophically (if active managers are able to consistently outperform the market, then this must involve skill). It is worth pointing out that, at a basic level, over any given time period some fund managers outperform the market average (either the average returns offered by replicating an index or the average returns across a range of fund managers with a similar investment focus). This is not just a theoretical view, it is reality. Some stocks will rise more than others over a certain period, and so some fund managers investing in companies listed in the same stock market will perform better than the average. The difficulty for fund investors is identifying if, and when, a particular fund manager (via a fund) will outperform the average. Star managers are those that are deemed to have the skill to be able to outperform over prolonged periods of time, or who have built up a following of clients in the belief that the manager can do this.

Client following is a particular feature supporting the status of star fund managers because their performance alone does not make their star shine, but instead it is their ability – and that of the sales and marketing team supporting them – to translate this into inflows and therefore to build increased scale in a fund that boosts their reputation. Crucially, a fund's scale also builds greater influence with the companies in which a fund manager invests.