Although excellence exists across all asset classes, few investment managers have demonstrated expertise across all financial markets and in all market conditions. The purpose of the manager selection process is to identify those investment houses most likely to excel given each client's specific circumstances and mandate.
Active versus passive
Passive management is widely misunderstood. Many investors believe that discretionary managers who stay close to their benchmarks are passive rather than active.
We disagree. A passive strategy is essentially a "buy and hold" portfolio. An active strategy is any investment approach which requires manager intervention to keep market exposure at their desired level.
Identifying a manager shortlist
ARC has constructed a methodology for ranking potential managers based on seven factors: risk; return; realism; reporting; reputation; remuneration; and resources. The importance
of each factor varies from client to client.
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Running a beauty parade
Once a shortlist of managers has been identified on the grid, a beauty parade can be organised. Planning is essential to ensure that all parties are adequately briefed, meeting objectives clear and timelines established.
Negotiation of service level agreements
Although fees and charges are rightly seen as a key service level component, if relationships between managers and clients are to work smoothly, the frequency and detail of information flows needs to be agreed in advance.
Ongoing manager due diligence
Once a manager is appointed, it is important that the investment process is continually reviewed.
Performance is just one of the metrics that needs to be considered. Through our on-going programme of manager visits and sophisticated due diligence
process we continually examine the stability and sustainability of the investment process.
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