Fund Manager Selection

Before we recommend a mutual fund for a client portfolio, we’ll spend a lot of time performing due diligence on the managers and how they’ve performed during good and bad market environments.  This goes beyond simply looking at their performance results, but understanding in-depth how they’ve achieved those results and the processes they utilize to manage the fund.  Although a bad investment process can temporarily yield good results and a good investment process can temporarily yield bad results, we are firm believers that time reveals the true worth of a fund manager and their investment process.  As such, our focus is not on outperforming the market every year.  Instead, our goal through the fund selection process is to identify good stewards of capital who can produce competitive investment returns over a market cycle of 5 to 10 years with below average risk.  In the section below, we briefly highlight some of the core beliefs that we seek in the investment managers we select.    

·         They are not afraid to accumulate cash during periods of unfavorable equity valuations. It never makes sense to be fully invested just for the sake of being fully invested if it’s clear the market is not offering attractive investment opportunities.  Cash is deferred purchasing power and is an effective risk management tool that is essential for deriving attractive long-term returns.   

·         They are bottoms up, long-term investors who are focused on the fundamentals of the business, not speculative short-term traders focused on the technical features of the stock price.       

·         They utilize a value investment philosophy and are sensitive to the price they pay for a business, always contemplating the downside scenario and always requiring an adequate margin of safety before investing. 

·         They construct their portfolios to reflect their best investment ideas and they do not dilute the quality of their recommendations just for the sake of diversification.  They understand that in order to outperform the index, their portfolios must look different from the index.  

·         They seek to invest in high quality businesses with strong balance sheets, durable competitive advantages, and high returns on capital.

·         They recognize the negative impact that taxes have on total investment returns and will seek to manage their portfolios tax efficiently.

Investors should carefully consider the investment objectives, risks, charges, and expenses of mutual funds. This and other important information is contained in the prospectuses, which can be obtained from your financial professional and should be read carefully before investing.