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Now browsing: Hometown News > Business Columns > Chadwick L. Hargis

Chadwick L. Hargis
This Week | Archive


Tips to select an appropriate investment manager
Rating: 2.95 / 5 (143 votes)  
Posted: 2007 Nov 16 - 02:53

Choosing an appropriate investment manager is one of the most important factors that can help you pursue your investment goals.

Investment managers have different approaches to investing, and vary greatly in the investment styles they follow, risks they take, potential returns they generate, and the types of securities they hold. Sophisticated institutional investors commit considerable resources to help identify those managers with whom they can entrust their assets.

Gaining access to some of the most highly respected professional investment managers used to require a lot of money, in most cases a minimum investment of $1 million. However, now you can gain access to the nation's leading investment managers for lower investment minimums, typically $100,000, through separately managed account programs offered by some financial services firms.

Who needs an investment manager?

Most affluent investors, small- to mid-sized companies and other organizations lack the time and resources to manage their investment portfolios successfully. In fact, many of these investors, depending on suitability, would prefer to hand over the day-to-day investment decision-making to a full-time professional manager. But conducting the research to choose an appropriate, quality manager from the thousands of asset management firms available can be both time-consuming and expensive, not to mention very difficult to do.

If you are interested in finding an investment manager, a good place to start is with your financial advisor. He or she can help you determine if separately managed accounts are suitable for your specific situation, in light of your risk tolerance, investment objectives and liquidity needs. Through separately managed account programs available at their firms, a financial advisor can help investors with a broad selection of quality investment managers to find the manager(s) who are appropriate.

The importance of manager research

Many full-service investment firms have designated manager research departments who carefully pre-screen and analyze investment manager candidates before the manager candidates may be accepted in the firm's programs to manage client assets. If your financial advisor's firm has a manager research department, it should be made up of professionals who have a depth of knowledge and expertise, and are backed by an array of capabilities and hands-on experience.

Some firms have manager research departments that include professionals who are former investment managers, equity and fixed income traders in the capital markets, and investment consultants.

The research team's experience and capabilities enables the team to conduct quality and in-depth research so that they can identify investment managers that they believe are well-positioned to help investors pursue their financial goals.

An integral part of the investment manager selection process is "due diligence."

Once the manager research team accepts certain managers for their firm's clients, the managers must continue to meet the team's due diligence standards over time in order to remain in good standing. In fact, given the importance of this function, some manager research departments spend more time monitoring the managers already in their firm's programs than they do looking for new candidates.

Choosing a manager for you

Whether your risk tolerance is conservative, aggressive or somewhere in between, you can find a manager who is suitable for you.

Your financial advisor can help you choose among managers who specialize in a number of asset classes and investment styles, such as domestic stocks, international stocks, fixed income or balanced investing.

Together, you and your financial advisor should carefully review the manager evaluations prepared by the financial advisor's manager research group before you select a manager.

Although past performance is no guarantee of future results, you should also consider the manager's track record. Don't limit yourself to one manager; perhaps a combination of managers to handle different aspects of your portfolio would be the best approach for you to consider.

Performance monitoring

If you decide to hire an investment manager, you will need to conduct ongoing monitoring of your manager's performance to assure the manager is working toward your investment objectives.

Performance monitoring should include quarterly reports that give you and your financial advisor an objective, statistical analysis of your investment manager's performance. The report should list all your account holdings and compare your rate of return with appropriate market indexes.

Because performance is based not only on return, but also on the level of risk incurred to pursue that return, the report should clearly assess the volatility of your portfolio during specific time periods.

For information about professional investment management and, depending on suitability, how to select a manager or combination of managers who can help you pursue your financial goals, contact your financial advisor today.

Chadwick L. Hargis is a financial advisor at UBS Financial Services, Marina Tower, Melbourne. He can be reached at (321) 729-6770 or chad.hargis@ubs.com.





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