SOCIAL media has encouraged scale and concentration. Customers more readily gravitate to what is already popular meaning winning platforms like Amazon and Facebook have steadily become dominant.

But we know this is not always healthy; it can bring bad business practice and reduce competition. There is good reason for customers to be cautious in following others into the most popular choices. This advice holds good for investors, too.

Recent years have encouraged the cult of the star investment manager. Sometimes this is built on a long-term investment record, although even then the precise basis of a record may not be questioned.

But the result can be monster funds that are victims of their own success. Raising a lot of money is undoubtedly a short-term win for an investment firm, but is it really good for clients?

In investment, opportunity is typically scarce. The industry is competitive, with many analysts and fund managers trying to find undervalued companies or those that offer better growth prospects.

The insights that a particular manager has to generate performance are usually quite specialised. An individual’s skill might apply, for example, to medium-sized growth businesses in a particular geographical market. Of course, teams can combine specialist expertise and cover more ground, but that serves to remind us that few investors work alone, despite public perception of the lone star manager.

Managers can compound risk with their own overconfidence. Unsurprisingly, some of the so-called stars have the fewest self-doubts. It takes a lot of objective data to prove skill in investment, but even the best records are punctuated with lengthy setbacks. And, if manager behaviour changes - adding to risks - this can trigger a downward spiral.

Clients like managers to be confident and reassure in difficult times, but recovery typically involves humility, reappraisal and risk reduction.

Clues to manager behaviour when underperforming can be found in the narrative they offer to investors. The key is to look beyond the confident headline - is there real insight into the problems? Managers and clients should be gathering more information to assess whether underperformance is simply normal market rotation, or whether it is driven by failures in the investment process.

Beleaguered fund managers often create more problems for themselves. Sometimes a star manager will get more aggressive at times when his or her views strongly diverge from the market. This may appeal to clients who love a contrarian, but the pendulum may never swing back. A performance problem that has emerged over a few years is rarely fixed in months.

A manager may explain the problem as an investment style that is out of fashion, but we should always question whether that explanation is accurate. It sounds heroic to be labelled a value investor or a contrarian, but these are difficult concepts to measure. These sort of stories can mean that a manager is not getting to grips with the underlying issues.

Behaviour and narratives can reveal much. Clients should pay attention to the investor updates and press interviews that star managers give. Dealing with a challenge involves personality and resilience. The right message on a setback is not redoubled confidence, but renewed analysis and an understanding of risk.

Apart from the behaviour risks that can be created by the cult of the individual, size can be a problem. Scale may bring efficiency and lower costs, but big individual stock-market holdings can be harder to buy and sell. Even investors with a long-term perspective can find their fund disrupted by others who panic.

Investors following a star need to keep a close watch. Joining a fan club can be risky if it turns into a stampeding herd.

Colin McLean is managing director of SVM Asset Management.