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Performance Evaluation Process

Performance Measurement Philosophy:

We believe that in order to make the best decisions, you must have timely and accurate information. To this end, we strive to develop the best tools to evaluate incumbent managers and to guide clients to the most profitable path forward. There are several areas of our services that are unique:

Holdings-Based Analysis

The first step in staying on top of the managers’ activities is to have the appropriate evaluation platform that includes holdings-based analysis. By conducting a holdings-based analysis (versus return-based analysis used by other consultants), we are often able to determine changes in style or strategy BEFORE it causes a performance issue.

Unique to our evaluation, we analyze and report on:

  • individual holdings
  • the portfolio’s sector weightings -v- benchmark weightings
  • the portfolio’s sector performance -v- benchmark’s sector performance
  • the portfolio’s average and median market capitalization
  • the portfolio’s price/earnings ratio
  • the portfolio’s dividend yield
  • the portfolio’s price/book ratio

Face-to-Face Due-Diligence Meetings

We conduct over 200 annual in-house due-diligence meetings with investment managers in our Atlanta office. We also conduct numerous conference calls, webcasts, and review industry mailings on investment advisors. This level of our process allows us to stay apprised of changes in personnel, style and strategy.  It provides a mechanism to evaluate investment themes, emerging asset classes and situations where a manager may not have a long track record of statistical data for evaluation. We receive this type of information daily.

On-Site Due-Diligence Meetings

We encourage clients to understand their investment managers’ processes. When we periodically conduct on-site due diligence meetings with your incumbent managers, we invite you to attend these reviews with us.

Reviewing Incumbent Managers

In reviewing incumbent investment managers, they may be put on a watch list because of organizational issues such as a change in portfolio manager(s), significant change in the investment process, significant growth of new assets, or changes in the ownership of the firm. If we become comfortable with the changes, we would recommend removing them from the watch list; if not, we would recommend termination. Organizational type issues usually require at least a six month period for thorough analysis.

An investment manager may also be put on the watch list because of poor investment performance. Generally, if the investment manager’s one-year performance ranks in the bottom quartile of its peer group and its performance is lower than its benchmark, it is put on the watch list. If the manager’s performance ranks in the bottom quartile for a second year and its performance is lower than its benchmark, they are usually terminated. If their performance improves to above the median, they are usually taken off the watch list.

All of the reasons for putting a manager on the watch list could ultimately be reason for a termination recommendation. If we cannot be satisfied that the issue has been either corrected or eliminated, we will recommend termination.