Where do you trust your money…

It is a surprise when your understanding of the world proves to be completely wrong. The 17th century Europeans believed that all swans were white – but this belief was shattered with the discovery of Australia which was teeming in black swans (and hence the title “The Black Swan” for Nassim Taleb’s excellent book). 

Last week I was shocked to discover that the peanut is in fact not a nut at all – it is a legume (the bean family).  A cashew nut is not a nut either.  Crazy.  The world of fund management can also be filled with “black swan” and “peanut” moments - an investment may not always be what it seems.  In this commentary we look at the steps investors and advisers can take to protect themselves and understand what they are investing in.

When it comes to racing, sailing relies on a strict code of honesty and self-policing.  That is why the discovery of cheating in the pre-America’s Cup AC45s was taken so seriously and punished harshly.  When it comes to investing in funds don’t rely on everyone to be self-policing.  Do your research - here are 6 steps to go through before handing over your money.

1. Demand transparency – identify the underlying assets