Selection of Investment Managers
The reputation and credibility of our firm is dependent on being selective of the investment managers we represent. Therefore, we implement an institutional due diligence as described below:
Maintaining a reputation of integrity and ethical standards/practices as a third party marketing firm. In a highly competitive marketplace, this helps to differentiate ACE from its peers and improves the probability that the highest quality hedge funds looking for marketing support will choose our firm. Institutional quality investors also trust our reputation and process and see us as an additional screen for their own due diligence efforts.
Sourcing managers: In finding and evaluating hedge fund managers, we look at three key sources of information:
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Hedge fund referrals: Our strong relationships with many institutional investors, prime brokers and other service providers with similar evaluation criteria is an invaluable resource in identifying high quality managers.
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Research: We review many of the leading industry publications and attend industry conferences.
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Hedge fund databases: All hedge fund databases are missing a significant number of hedge funds. As a result we discuss candidates internally and often cross reference within our industry contacts to see if further due diligence is warranted.
Quantitative screening of managers. Some of the factors we typically focus on include:
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Assets under management of at least $500 million in strategy.
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Performance that ranks near the top of their strategy
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Low historical performance drawdowns compared to their peer group.
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Correlations to a major market index given their investment strategy.
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Performance characterized by quantifiable alpha and its repetitiveness.
Qualitative screening of managers. We analyze each firm based on multiple variables which include:
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Top down analysis: Is it a strategy we believe will do well going forward given the current economic environment?
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Quality of firm: A review of the organizational infrastructure and the commitment to support growth.
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Quality of investment team: Pedigree, industry knowledge, experience, reputations, and the continuity of key investment staff.
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Review of investment philosophy and process: What is the manager’s edge?
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Service providers and fund terms.
All senior members of our team speak with the portfolio manager: After speaking with a potential investment manager, all members communicate their assessment of the fund and discuss whether the strategy and performance would make it a viable product in their respective regions and with their respective investor-base.
Market feedback/Operational due diligence: This consists of checking references and other sources to confirm our perception of the manager, as well as contacting all service providers to confirm the organization is a client in good standing and has no unresolved issues.
Continual re-evaluation of manager: Once a manager is brought on to our platform we receive constant feedback from the investors we reach out to on a monthly basis. This feedback is communicated to the managers to help improve their offering and is reviewed internally for any sign of potential issues.
