Manager Selection Process

Our process begins with a quantitative search that eliminates the portfolio managers that have been enable to perform on a level that is equal to or better than the appropriate benchmarks that we have identified for the various asset categories. In order to do this, we use highly specialized database services that have the capability of screening a universe of over 5,000 strategies. However, this universe is not comprehensive, in that there are a multitude of managers in the industry that do not include their strategies in any listing or database services. For that reason, we cross reference our database searches with other ranking services as well as the portfolio managers that we know through our network of contacts in the industry. After extensive research to find consistent out performers, we use the focused list of managers only as a starting point for our due diligence process.

Eighty five percent of money managers consistently under perform the market. We immediately identify the fifteen percent of the universe that has been able to utilize a successful investment strategy and has consequently out performed their appropriate benchmark and peer group. From this group of remaining managers, our process becomes more in-depth. At this point, we contact the manager directly, obtaining the information that they typically use as their marketing material as well as other confidential information such as sample portfolios, performance reports on actual managed accounts, and references (either past or current clients). Typically, this is not shared with the general public, however, our position as a registered investment advisor allows us access to this information. This type of information is very important, because it tells us a great deal of information about the portfolio manager’s abilities. Specifically:

• Sample Portfolios
  From the sample portfolios we verify that the securities that a manager is holding in the client portfolios are consistent with their stated investment style/process. This verification is of utmost importance, because a manager who invests in securities outside of their realm of expertise tends to under perform their peer group at some point in time.
  


• Performance Reports
  By analyzing the actual performance of client accounts, we are able to determine the level of success that is achieved for the average client. The level of variance between accounts is revealed after this analysis. We seek out those managers who provide the same level of performance to all of their clients. It is counterproductive for us to recommend a manager with a large level of variance in account performance, as we would be unable to determine what level of service our clients would receive by using a particular manager. Also, due to high variance of performance between accounts, it makes it difficult to evaluate the effectiveness of that managers investment strategy.
  


• References
  Feedback from actual clients is imperative to determine the competency of a particular manager. Current clients can be informative as to the level of service and satisfaction a manager provides.

In addition, we analyze issues such as buy and sell discipline, style analysis and historic diversion from that style, and consistency of results from strict adherence to the style.

After a manager passes through all of the initial screens, we take the time to personally meet as many people as possible within their organization. We use this interaction to evaluate the employees and operating functions of the organization. We evaluate the trading procedure, research process, portfolio building, and account monitoring of the firm. By drilling down and knowing as much about the managers that we work with as possible, we become fully comfortable with their abilities before adding a manager to our platform. Stock picking has become more of an elite art that is common to all our managers whether they are looking at large or small companies. In an increasingly competitive environment, finding these outperforming managers has become a science where TrustNavigator's professionalism and objectivity differentiates this service.