In today’s volatile investment market, selecting the right investment manager has become more critical than ever. Investors are demanding greater transparency, accountability, and performance from their managers. As a result, investment manager selection processes are becoming increasingly rigorous, with heightened scrutiny and due diligence.
Key Scrutiny Areas
Investment managers are facing intense scrutiny in several key areas:
- Investment Philosophy and Process: Investors are demanding a clear understanding of the manager’s investment philosophy, decision-making process, and risk management strategies.
- Performance Track Record: Past performance, while not necessarily indicative of future results, remains a key factor in manager selection. Investors are analyzing long-term performance, consistency, and risk-adjusted returns.
- Fees and Expenses: Investors are closely examining fees and expenses charged by investment managers. They are seeking transparent and reasonable fee structures.
- Organizational Structure and Culture: Investors are assessing the manager’s organizational structure, compliance history, and investment culture. They are looking for stability, transparency, and alignment with their own values.
Due Diligence Best Practices
To navigate the intensified scrutiny, investment managers should adopt the following due diligence best practices:
1. Conduct Thorough Research
Gather information from multiple sources, including independent research firms, industry analysts, and financial publications. Attend industry conferences and engage in discussions with potential managers.
2. Request Detailed RFPs
Develop comprehensive request for proposals (RFPs) that outline your investment objectives, performance expectations, and due diligence requirements. Request detailed responses from potential managers.
3. Schedule In-Depth Meetings
Schedule in-person or virtual meetings with potential managers to discuss their investment philosophy, process, and performance. Ask probing questions to gain a comprehensive understanding of their capabilities.
4. Reference Check
Contact previous and current investors to inquire about the manager’s performance, professionalism, and responsiveness.
5. Legal and Compliance Review
Review the manager’s legal and compliance history. Ensure they have a strong track record and adherence to regulatory requirements.
Conclusion
Investment manager selection is a critical decision that requires thorough due diligence. By preparing for intensified scrutiny and adopting best practices, investors can identify and select the most capable managers to achieve their investment goals.
Kind regards M. Davis.
