Our Investment Analytics Group (IAG), conducts extensive investment manager research across 25+ core asset classes, including qualitative analysis based on portfolio manager interviews. The qualitative data we collect feeds our proprietary database and, in turn, is used in drafting custom research reports for both our discretionary and non-discretionary portfolios in our institutional and wealth management practice areas.

The quantitative information we use comes from Morningstar DirectTM, an internet-based research platform that provides access to Morningstar’s  global investment database and analytics. The database includes U.S. and European mutual funds, separate accounts, variable annuities, exchange-traded funds and market indexes. Morningstar DirectTM contains sophisticated holdings and returns-based style analytics, insightful peer and competitive analysis, and thorough manager performance evaluation.

We send out customized quarterly questionnaires to acquire and maintain data provided directly from the managers. Verification is performed by cross referencing multiple data points received from the investment managers (such as comparing portfolio holdings with the stated performance and/or asset allocation) and by comparing data supplied by the manager with third-party data sources such as Morningstar.

Our 4-step  investment selection process:

Step 1: Screen funds within the asset class using a series of well-defined investment selection metrics. For each asset class, we begin with all mutual funds available, via the Morningstar database. We then apply quantitative criteria to the list of managers. In our evaluation of managers, we look for portfolios that are style pure, consistent, diversified and lower cost than their peers.

Step 2: Conduct additional qualitative and quantitative analysis on the remaining funds.  Application of the quantitative criteria in Step 1 narrows the list of managers down to a more manageable number. At this point, our analysts dig further into the fund’s portfolio management team, investment philosophy and process, and supporting research staff. [expand title=”more” swaptitle=”less”] This is largely a qualitative evaluation focused on the criteria used to build a portfolio, as well as a re-evaluation of the performance data in light of the portfolio fundamentals communicated to us by the managers. This process narrows the list down to our semi-finalists. [/expand]

Step 3: Identify the top funds within the asset class. Once the semi-finalist investment managers are identified, we send customized questionnaires based on each asset class to the managers. The questionnaire analysis is followed up with a manager meeting or conference call with a member of the portfolio management team.

Step 4: Prepare final fund recommendations. After reviewing all semi-finalists, we identify 2-5 acceptable funds per category and prepare a detailed report to explain our finalist selections and the process we used to arrive at them.