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Our Focus is on Process and People |
| Pure mathematical methods for selecting future winning funds and managers have proven to be less than reliable. As the commonly used disclaimer in the fund business states, “past performance is not necessarily indicative of future returns”. While there is no perfect predictor, our experience has proven to us that it is the rigour of the process and the experience of the people that will most significantly influence future investment success. That is why we blend prudent performance analysis with a heavy dose of qualitative research – with a focus on the latter. Our manager interviews are the core of our qualitative research. Our first contact with a manager usually lasts 1-2 hours, talking only about process. Hours more are spent digging into the manager’s portfolio and history. Our goal is to get a firm grasp of how a manager actually manages clients’ money. |
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What we look for |
• People & Organization
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• What is the ownership structure of the team? |
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• What is the experience of the team? |
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• Is there strong passion for what they do? |
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• Is there a strong sense of team and a well-entrenched belief in the lead-manager’s philosophy or is it a group of individuals each with their own beliefs? |
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• How has any turnover amongst the team impacted the culture and the results? |
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• Do team members feel they have a meaningful future within the group? |
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• Is each of the team members appropriately compensated and incented? |
• Philosophy Of Their Investment Firm
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• Is there a strong philosophical belief on how funds should be managed? |
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• Is the philosophy reasonable in a private client context? |
• Process – Security Selection
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• What are the buy and sell disciplines? |
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• How is research conducted? |
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• Who is responsible for researching new ideas? |
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• What is the process for adding or removing a stock (or bond) from a portfolio? |
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• What is the sensitivity to a security’s price? |
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• Who has responsibility to continue monitoring a security once it has been added to a portfolio? |
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• Do these disciplines adapt to changing market conditions? |
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• Process – Portfolio Construction
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• How are security investments combined into an overall portfolio structure? |
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• How concerned are they about portfolio structure versus an index? |
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• What are the risk management disciplines? |
• Private Client Orientation
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• Annual turnover |
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• Tax awareness |
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• Downside protection |
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• How have they historically dealt with losers in the portfolios? |
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• How well do they communicate what has happened (and why) as well as their outlook for the future (are they keeping the Advisors engaged and arming them with adequate information for their clients)? |
• Performance Of Their Investment Offering
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• In which types of markets have they performed well? |
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• In which types of markets have they not performed well? |
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• Up-capture and down-capture relative to an appropriate benchmark? |
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• Volatility relative to an appropriate benchmark? |
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• Have historical securities transactions been consistent with stated philosophy, style and disciplines? |
• Policies, Procedures, Protection
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• Do the current policies & procedures (both compliance and operational) properly support the investment management function and adhere to industry best practices and regulatory requirements? |
• Pricing Of Their Investment Offering
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• Do the fees represent good value? |
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• If performance fees are charged, are they reasonable and do safe-guards such as high-water marks exist? |
• Partnering Ability
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• Are they willing to assist with communication of their strategy, performance and outlook via conference calls and presentations? |
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