In the ever-evolving landscape of wealth management, the art of fund selection is undergoing a profound transformation. At the Hubbis Malaysia Wealth Management Forum 2026, Nicolas Gisbert, Head of Sales, Southeast Asia and Head of Strategic Partnerships, Asia at Morningstar Research, shed light on the critical principles that underpin effective fund selection in this new era. Gisbert's insights are particularly relevant for wealth managers in Malaysia, as they navigate the complexities of a rapidly changing investment environment.
The Changing Investment Landscape
Gisbert began by emphasizing the expanding investment universe, which now encompasses a broad spectrum of products, from mutual funds and ETFs to private markets and alternatives. This diversification presents both opportunities and challenges, as wealth managers must assess a wider range of investment options. The data and technology revolution, led by AI, is reshaping how data is collected, analyzed, and consumed, offering both internal productivity gains and enhanced client-facing capabilities. However, Gisbert stressed that AI's true value lies in its ability to anchor to verified research and structured data, rather than in open-ended information retrieval.
Personalization is another significant trend, with investors increasingly seeking portfolios that align with their specific preferences, such as ESG considerations, Shariah compliance, and industry exclusions. Gisbert highlighted that Morningstar's research framework is designed to support this personalized approach, providing wealth managers with the tools to create customized portfolios that reflect client objectives and constraints.
Morningstar's Research Framework
At the heart of Morningstar's approach is a five-step fund selection process, which Gisbert outlined in detail. The first step is identification, where wealth managers define the relevant universe of investments based on asset class, sector, region, and other criteria. This foundational step ensures that the selection process is tailored to the client's needs and objectives.
The second step is quantitative screening, which involves building a long list of candidates and applying scorecards based on measurable criteria. While performance is a key factor, Gisbert cautioned against relying solely on it, emphasizing the importance of considering alternative assessment methods such as multi-factor analysis, attribution, and risk-adjusted return metrics. The third step is qualitative screening, where Morningstar's analyst-led research plays a pivotal role in evaluating the fund's people, process, and parent structure.
The fourth step is product and operational due diligence, which involves understanding the manager, investment process, operational infrastructure, and risk controls. The final step is portfolio integration and monitoring, where the fund is assessed in the context of the client's broader portfolio, considering diversification, risk profile, and alignment with client objectives.
Looking Beyond Past Performance
Gisbert stressed that past performance should not be the sole determinant of fund selection. Instead, wealth managers should consider risk-adjusted returns, consistency of alpha generation, peer comparisons, fees, active share, and qualitative factors. He highlighted the importance of fees, noting that fee pressure is intensifying across asset management, particularly as passive strategies and lower-cost benchmarks challenge incumbents. For end investors, costs directly impact net returns, and excessive fees can significantly erode performance.
The Morningstar Medalist Rating Framework
Gisbert explained Morningstar's Medalist Rating, a qualitative assessment framework used to evaluate funds on a forward-looking basis. The framework is built around three pillars: People, Process, and Parent. The People pillar assesses the quality, experience, and alignment of the investment team, while the Process pillar evaluates security selection, idea generation, and risk management. The Parent pillar looks at the asset management firm's ownership, financial strength, and regulatory standards.
The Medalist Rating provides a clear indication of a fund's positive alpha potential, with Gold representing the top 15%, Silver the next 35%, and Bronze the remaining 50%. The rating is not merely a backward-looking performance label but a forward-looking assessment of a fund's ability to generate future alpha.
Due Diligence and Portfolio Fit
Gisbert emphasized the importance of due diligence and portfolio fit in the fund selection process. Wealth managers must understand the manager's interaction points and assess the fund's support by a coherent operating model. Portfolio fit is equally crucial, as a selected fund must make sense within the client's broader asset allocation. Risk budgeting, portfolio look-through analysis, and correlation assessment are key tools in this process.
Common Pitfalls in Fund Selection
Gisbert identified several recurring mistakes in fund selection, including chasing performance, ignoring fees, poor diversification, neglecting risk assessment, and overlooking fund manager changes. He stressed the need for a repeatable framework that combines transparency, independent research, long-term thinking, data quality, and disciplined monitoring to improve investor outcomes.
AI, Data, and the Future of Research Consumption
Gisbert concluded by discussing Morningstar's position in the AI revolution. He emphasized that Morningstar's advantage lies in its combination of trusted data, accumulated research, and analyst-reviewed content built over more than 40 years. AI becomes more useful when it is grounded in high-quality source material, rather than in open-ended information retrieval. Morningstar's MCP server, which connects its research environment with AI tools, is already changing client conversations, allowing for more efficient access to trusted research.
In the end, Gisbert's message was clear: fund selection is becoming more demanding, but it is also an opportunity to improve investor outcomes. By combining transparency, independent research, long-term thinking, data quality, and disciplined monitoring, wealth managers can navigate the complexities of the changing investment landscape and deliver better results for their clients.
