The backbone of our research process is qualitative research and this is based on regular, face-to-face meetings with fund managers. Rather than solely relying on past performance and statistical analysis, our approach is to understand whether a fund is appropriately managed in relation to its specific aims and objectives. It is this qualitative analysis which clearly differentiates us from other fund research and ratings companies.
We analyse such a wide variety of funds, we have to be flexible in our research approach. During meetings we work within an organised framework, but are not constrained by a fixed format, as it is vital to consider each fund on an individual basis. Saying that, there are a number of key areas we always cover as they are important for our understanding of the total proposition. These are as follows:
1. Group ownership and stability
It is important to know whether an investment management group is committed to the retail marketplace and whether they have provided the correct level of resources to enable the investment team to deliver the fund’s objectives.
2. Investment philosophy and objectives
We need to understand the investment philosophy of each fund we analyse. It should be clearly articulated and the manager should have realistic and achievable investment objectives. An important part of this discussion is to question how the managers believe they add value and why.
3. Personnel
In our meetings we question the overall resources of the group to understand if it has strength in depth or is highly reliant on the special talents of a few individuals. We also consider the level of individual fund manager experience, how they are motivated and whether the organisation promotes a star manager culture or prefers a team approach.
4. Investment process
Our objective is to establish what process the group, team or manager employ. We take a great deal of time and effort in order to understand the mechanics of the investment process and whether it is applied effectively and consistently. It is also important that the process is supportive of the manager’s philosophy and the fund’s stated objectives.
5. Research resources
We are interested in how fund managers are supported by their analysts, how ideas are generated and what emphasis is placed on the use of external resources, for example brokers, economists and information services.
6. Portfolio construction and risk controls
Lastly we aim to understand an organisation’s attitude to risk and the fund manager’s own appreciation of the trade-off between risk and reward. It’s important to understand how they think about and define risk and the systems which are in place to monitor risk and ensure that managers adhere to the guidelines for portfolio mandates.