Establish a strong, documented selection process to identify managers who are in line with the client’s Investment Policy Statement and fill the specific role needed within the asset allocation model. Once you have identified managers who meet your investment criteria, ask three questions to evaluate several key qualitative and quantitative data points.
Eliminate any manager with below-average investment results over a series of meaningful periods. Strong results over one or two years may not represent enough of a track record. Be sure to review a manager’s results over longer periods of time and a variety of market and economic cycles. Then you can determine who generated the strongest results at a low cost for your client. Expenses should be reasonable based on industry averages.
Research proves that two simple screens can uncover funds that have beaten the indexes over several periods. Use the Select Investment Scorecard to see how their advantage has grown over time.
Learn about the investment manager’s process and determine what factors drove their results. Are they reliant on one person for investment results or do they employ a committee approach? What is the experience of the manager(s)? Do the managers conduct their own research or do they outsource it? Learning whether managers are invested in their own funds is often another helpful barometer in helping to determine their level of commitment.
Who were the key players who drove the manager’s past results? Are the same people still managing the fund or have they left? You want to ensure to the best of your ability that the investment manager’s track record is strong and repeatable. Also ask how many funds they’re managing. Will they be focused on the fund you’re interested in for your client?
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
This material is intended for use by financial professionals or in conjunction with the advice of a financial professional.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.