Managing the Managers
Spring 2009
Our goal at T.E. Investment Counsel is to provide clients with access to investment managers who will consistently deliver added value over the long term. We take a proactive approach, meeting regularly to discuss issues and conducting qualitative and quantitative reviews at least quarterly.
Research
We begin our search for managers by limiting the field to those who have at least a 5-year track record and have demonstrated consistency in adding value relative to the market. From this group, we eliminate managers with known organizational issues, high staff turnover and an inadequate investment process. Although we primarily use external databases for screening investment managers, ideas for new managers can also come from our external contacts and investment managers themselves.
Selection
Managers that meet our criteria are asked to fill out a detailed questionnaire. We review their investment process and meet key investment personnel through on-site due diligence visits. We focus on their organizational strengths (ownership structure and shareholders’ agreement, long-term business plan and assets gained and lost in the last three to five years) and the four “P”s – their people (qualifications of the team, succession planning and a compensation structure aligned with our clients’ interests), process (research, buy/sell decision-making and the thoroughness of the investment process), portfolio construction (risk controls in place to limit exposure to individual stocks and sectors) and performance (consistency with the manager’s investment philosophy and style).
Oversight
A key step in our process, we rigorously monitor our selected managers, ensuring we understand where added value comes from and the risks embedded in their performance. In addition, through qualitative and quantitative analysis, we evaluate whether performance is deviating from the manager’s style and stated investment objectives.