Historical record and investment style are two key areas to look at when choosing an investment counsellor.
Screening by historical record and investment style, the prospective client develops a “long list” of potentially suitable investment counselling firms. The prospective client asks the investment counselling firms on this “long list” to answer a “questionnaire,” which asks detailed questions about the firm’s organization, capabilities, investment philosophy and process.
Culling down the “long list” to four to six potentially suitable firms, the prospective client arranges a “short list” presentation where she interviews the management and key personnel of the investment counselling firms. The prospective client then chooses a manager from the short list candidates.
At this point, it is obvious that selecting an investment manager is a very time consuming process requiring quite a bit of expertise and knowledge. This is why most large clients hire an “investment consultant” to help them select and review their investment managers. Very large and sophisticated corporate funds usually hire an investment consulting and performance measurement firm such as Frank Russell or SEI. Large actuarial consulting firms such as William Mercer and Towers, Perrin have “asset management” teams that perform the same function. These firms maintain databases of investment counselling firms’ performance and maintain up-to-date files on the characteristics of each firm. These firms bill their consulting services on a fee basis or act on retainer for their clients.