Due Diligence Process
Our investment manager due diligence process focuses on the people, process and performance of the investment product. We conduct multiple meetings with the investment team to understand the investment process and conduct multiple on-site visits to meet all key members of the investment team. Our research is captured in a detailed "due diligence packet" prepared by the Consultant assigned to research that investment manager. This packet contains detailed qualitative and quantitative information on the manager and is reviewed by each consultant at our firm. If all of our consultants approve the packet, the manager is invited to our offices to make a presentation to our consultants and to be considered for final qualification and addition to our approved manager list.
Specific characteristics we seek in investment managers include:
- Consistency of staff managing the investment process.
- Manageable account and asset growth.
- Organizational stability.
- Consistency of investment style as verified using holdings-based analysis.
- Best in class performance versus style universes and returns that exceed the benchmark index, net of investment management fees over long time periods.
- Audited track record.
Consultants Conduct Manager Research
We do not delegate investment manager research responsibilities to our analysts. Rather, our consultants conduct our manager research utilizing their many years of experience in evaluating investment management firms and products. This structure ensures that our consultants know the investment managers we are recommending to our clients, having conducted the research themselves and participated in the due diligence process of every investment manager on our approved list.
Investment Manager Search and Selection
Ellwood Associates' investment manager search process begins with the identification of managers on Ellwood Associates' approved manager list that meet the client's specific criteria (e.g., account size, volatility risk level, etc.). We select three to five approved managers that meet the current search criteria and subject these search candidates to highly detailed quantitative and qualitative analyses that are summarized in a written manager search report. The quantitative analysis focuses on a number of return and risk comparisons between candidates and relative to an appropriate style universe and benchmark index. Each search candidate will be reviewed in conjunction with the total portfolio's other managers to evaluate how well they fit in terms of style diversification, return enhancement and volatility reduction. This step in the search process is designed to yield a manageable number of finalist candidates to be interviewed, typically two or three. We attend all interviews and participate in decision-making discussions. The entire focus of this search process is to provide the investment committee with the performance data, organizational insights and an understanding of the investment process that are necessary to select the manager best suited to meet their needs.
Once the client has made their decision, we help to expedite the retention process by coordinating contracts and guidelines between the new manager and the client as well as the coordination of the transition between the old and new managers.
Manager Surveillance
Our consultants and analysts are in ongoing contact with the investment managers used by our clients through e-mail, on-site visits and quarterly conference calls. Through a formal surveillance program, a team of consultants and analysts monitors the critical attributes of the firm, investment process and performance on a quarterly basis. To the extent we see any changes or causes for concern we bring these issues to our clients' attention immediately with a recommendation for action when appropriate. This surveillance function assists our investment committees and trustees in fulfilling their fiduciary duties.