Selecting Investment Managers
We believe detailed and carefully constructed screening procedures are well worth the effort when choosing investment managers.
The systematic procedures we use are designed to make the choice of a manager as objective as possible and to provide a foundation for a good working relationship with the organization that is ultimately selected. Specific procedures provide evidence that the plan sponsor has made the selection in a prudent fashion after considering a variety of alternatives. Moreover, detailed discussions with potential managers provide a basis for effective communication with the organization(s) finally selected.
Generally, our reviews of investment managers focus on the following areas:
- Stability and size of the organization, client retention, asset growth, ownership, business affiliations and types of accounts managed
- Depth and experience of the investment staff, the roles of investment professionals in the decision-making process and compensation
- Investment performance, including variability of investment results and dispersion of results among accounts with similar objectives
- Implementation of and adherence to investment policy and process
- Internal control procedures to monitor conformity with firm-wide and/or client guidelines
- Usefulness of client reports and communications
Our selection process includes the following steps:
- Designating candidates: We will suggest names of organizations based on both our internal and external investment managers database files. We are also willing to request proposals from any companies the client designates, including existing managers. Our process is completely objective, as we do not receive any forms of compensation from the investment management community.
- Preparing written questionnaires: We prepare questionnaires for the candidate managers requesting further information about their capabilities and services. The questionnaires cover important features of each organization's personnel, fees and prior investment performance. We also obtain information on the scope and nature of each firm's clientele and a description of suggested investment practices and policies.
- Preparing a summary report: Once the proposals have been received, we prepare a written summary report and meet with you to review it. This procedure allows us to eliminate those candidates who appear least likely to meet your requirements.
- Conducting personal interviews: We arrange and participate in interviews of the finalist candidates. We assist in questioning candidates about aspects of services not fully covered in the written proposals.
- Selecting managers: We assist in summarizing the key features of both the written and oral presentations to assist you in reaching a decision.
- Implementing the new management arrangement: Finally, we work with the plan's legal counsel to set up the new investment management arrangement. This includes negotiating the fee, reviewing the proposed contract to ensure that it is consistent with the proposal made and working with the manager to develop appropriate ongoing reporting procedures.