A Step-by-Step Guide to Investment Manager Selection

Choosing the right investment manager can be a daunting task, especially for those new to investing. The first step is to clearly define your investment goals and risk tolerance, which will help you narrow down your search.

Understanding your investment horizon is crucial, as it will impact the types of investments you can make. For instance, if you have a short-term horizon, you may want to prioritize liquidity and stability over long-term growth.

Your investment goals will also influence your choice of asset allocation, which can range from 50% to 80% stocks, depending on your risk tolerance and investment horizon. For example, a more conservative investor may allocate 50% to 60% to stocks, while a more aggressive investor may allocate 70% to 80%.

Ultimately, selecting the right investment manager requires careful consideration of your individual circumstances and needs.

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Choosing an Investment Manager is a daunting task, especially for those who aren't professional investment analysts. It's like choosing a stock, where it sounds easy at first but requires a lot of information and expertise.

A sound and disciplined investment philosophy is key to a successful investment manager. This is the foundation upon which a good investment manager builds their strategy.

The investment process, particularly security selection, should be understandable and reasonably simple. If you can't understand it, the manager probably doesn't.

A historical track record is only evidence of skill, but it's not a guarantee of future success. A proper manager search will help you determine whether the historical performance was due to skill or luck.

It's better to choose an investment manager wisely upfront rather than trying to sort things out along the way when things get tough.

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To ensure you're making an informed decision when selecting an investment manager, it's essential to understand the due diligence process. A rigorous and objective due diligence is crucial to identifying the right manager for your investment needs.

The process involves researching the manager's past successes to determine if the factors that led to those successes are still intact. This includes evaluating the manager's philosophy, process, and consistency in their approach.

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A well-defined process can serve as a constant among market uncertainty, so it's vital to understand how the manager sources and analyzes investments. A proven, repeatable process can generate alpha going forward.

To further assess a manager's capabilities, it's beneficial to have ongoing due diligence and monitoring. This can involve maintaining a watch list of managers, conducting conference calls, and even on-site visits to gain a deeper understanding of their decision-making processes.

Investment selection is a critical aspect of the client experience, and it's not something you want to leave up to chance. By doing your due diligence, you can ensure that you're partnering with a manager who has a consistent and effective process in place.

ROAM Capital's selection methodology is grounded in best international industry practices and guidelines. They follow publications and recommendations from ILPA and PRI, and subscribe to research platforms like Preqin, Cambridge Associates, and Bain & Co.

Their deep research-driven approach is a core differentiator as a placement agent in Latin America. This approach is valued by their investor base, who consider them a trusted source for industry research and preliminary analysis on funds.

ROAM Capital researches private, alternative investments markets across dozens of asset classes and global regions. They look for "best of breed" fund managers with top-quartile track records, team stability, and strong interest alignment.

They establish relationships with top-performing managers early on, who have not previously raised Latin American capital. These managers' strategies are aligned with the asset allocation plans of their institutional investor base.

ROAM Capital maintains close relationships with institutional allocators in Latin America. They track regulatory filings to identify new fund managers being included in these allocators' portfolios.

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ROAM's rigorous Due Diligence efforts and focused manager selection process yields world-class General Partners with primarily "top quartile" returns. This means they've done their homework to find top-notch fund managers who consistently deliver strong results.

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To evaluate these managers, ROAM uses a comprehensive four key variable proprietary Scorecard analysis. This thorough approach helps identify the best managers to include in their platform.

Here's a breakdown of the key factors ROAM looks for in a manager's performance:

Evaluating a manager's performance is a crucial part of the investment decision-making process.

We analyze a manager's return, risk, and Modern Portfolio Theory (MPT) stats to get a comprehensive understanding of their performance.

In addition to these stats, we also complete a scenario analysis and stress testing to see how their performance holds up under different market environments.

We're looking for managers who can provide two key things: alpha that is less correlated with other investments in the portfolio, and consistency in their ability to generate excess returns.

To break it down, here are the two key performance metrics we're looking for:

Evaluating a manager's portfolio is crucial to understanding their effectiveness. Objectively, this requires a detailed analysis of performance, including attribution analysis compared to the manager's stated benchmark.

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We examine the portfolios to determine the changes in allocation and fit within the overall investment objective of the manager or fund. This helps us understand how well the manager's strategy aligns with their goals.

The "Active Share" metric is a key indicator of active management. We pay attention to it to determine how much of the manager's strategy is driven by active decision-making.

A high "Active Share" suggests that the manager is actively managing the portfolio, while a low "Active Share" indicates a more passive approach. This information is essential in understanding the manager's investment philosophy and style.

We also analyze the sources of returns to understand the manager's strengths and weaknesses. This includes examining the manager's allocation, selection, and interaction effect. By doing so, we can gain a deeper understanding of the manager's ability to generate active returns.

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When evaluating an investment manager, it's essential to consider their investment philosophy and strategy. This will help you determine if their approach aligns with your investment goals and risk tolerance.

A good investment manager should have a clear and concise investment philosophy, which can be seen in their investment approach. Their philosophy may emphasize long-term growth, income generation, or a combination of both.

Their investment strategy should be tailored to their philosophy and should be clearly communicated to investors. This strategy may involve a mix of active and passive management, or a focus on specific asset classes or sectors.

Ultimately, the investment manager's philosophy and strategy will drive their decision-making process, so it's crucial to understand these elements before investing.

Investors should consider the investment manager's internal research capabilities, which can provide in-depth fund manager and opportunity set analysis, as seen in ROAM Capital's Sample Peer Group Analysis.

Having access to thorough analysis can give investors a more comprehensive understanding of their investments. ROAM's internal research capabilities afford investors with in-depth fund manager and opportunity set analysis.

A good investment manager should be able to provide clear and concise reports that are easy to understand, even for those without a background in finance. This can help investors make informed decisions about their investments.

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When considering an investment manager, you'll want to think about the minimum account size they require. Most large investment managers have high minimums, often in the range of five to ten million dollars.

These high minimums are common for institutional money managers, but some may have private client divisions with lower minimums, typically between $500,000 to $1,000,000.

Smaller investment counseling firms may have lower minimums for segregated funds, and banks, trust companies, and investment dealers often have investment management divisions that manage money for their clients.

To give you a better idea of the different account size requirements, here's a brief overview:

Keep in mind that these are general guidelines, and the specific requirements may vary depending on the investment manager and their policies.

When evaluating an investment manager, the price of an investment is a crucial factor to consider. This includes the expense ratio or price, which should be commensurate with the historical performance versus risk, and compared to competitors.

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The proliferation of ETFs has accelerated the question of "value-add" on a net of fee basis, making it essential to consider the cost of illiquidity in analyzing the price of an investment.

An investment's price should be evaluated in relation to its historical performance and risk, ensuring that it's a fair deal.