Mar. 24--Last year was a disastrous year for the global financial markets, with trillions of dollars in wealth wiped away from investor portfolios, whether it be large sovereign wealth funds, family offices, pension funds or retail investors. Rajeev Baddepudi and Ivan Ng, research analysts for the global fund intelligence company Lipper, share their thoughts on the impact the crisis has had on the global asset management industry.

Generally speaking, are there any common features or characteristics that separate the best funds from the rest? What should investors be looking for when shopping for funds?

Historically, managers who made a correct macro call or executed their investment strategies well -- say, value managers finding real value to invest in -- have often been able to outperform their peer group.

But over the past year, funds have struggled to outperform their benchmarks and/or peers, not only because the crisis affected markets so broadly but also because it forced market price discovery largely to be decoupled from underlying fundamentals. The key differentiating factor remains the ability of fund managers to make the right macro calls and value plays on a consistent basis.

Going forward, it makes sense for investors to return to investment basics -- have a proper asset allocation, diversify and look for managers with a good track record. In the years leading up to the crisis, risk was underpriced as a liquidity boom fuelled the growth of all asset classes and just the same way, the crunch in liquidity caused correlations between all asset classes to move closer together during the financial crisis of 2008 as prices fell in tandem.

Asset allocation and manager selection will be key in the near term, more so than diversification, as the current market climate warrants a more rigorous scrutiny -- quantitative as well as qualitative -- of investment process and risk.

What questions should I be asking my private banker or adviser? If even the most heralded actively managed funds were unable to keep capital safe, what would you say to an investor arguing that one should just save on fees and look at index funds or sector ETFs?

There are certain merits to buying ETFs for investors as an investor's returns will always be in line with the market.

However, with markets last year having fallen so drastically, it is unlikely that any investor who was invested in market/sector ETFs would have been unscathed as well, unless they are short the underlying sector.