Redington’s Nick Samuels discusses the best way to select (and deselect) fund managers in private markets, where information is less standardised and data often inaccessible.
Manager research is all about finding the best funds and managers globally, and creating a process to screen, select, and monitor them to ensure they do the job they were hired for. The process also needs to support appropriate deselection when the circumstances arrive.
So, if we’re looking at the research process, what are the top tips that really help us to understand a manager, their process, and select the most appropriate strategies for our clients?
1. Face-to-face interaction
Meeting managers face to face, at their office and going to site visits, ensures the deepest, most rich approach to manager research. You’ll learn far more from this than you will from the most detailed request for information, particularly in private markets where information is less standardised and sometimes less regulated.
2. Data is crucial
Data isn’t very accessible in private markets, so having access to clean data via the right channels, as well as good systems and software to analyse it is fundamental to good research. Using technology to facilitate early-stage research is an excellent way to conduct initial screening and manage time and resources efficiently.
3. Strong and continued engagement
Relationships and transparency matter in private markets where information is opaque. To be able to source better information from a manager and cement your understanding of their process, continued and longstanding engagement is crucial. These are long-term investments that require long-term relationships so take your time.
4. It’s all in the answer
It’s as much about listening to the answers as asking questions. When you engage with a manager, do their answers feel formulaic? How do they construct the answers to your question and how open are they when they don’t have an answer? ESG is a great example here – managers write in their documents that “ESG is integrated into the process”, but you’ll often find that when speaking with them, they either do not reference it at all or talk all policy and no practice. It should be integrated, but can be siloed to a different team or part of the business.
5. Same question, different people
It’s always useful to ask different people the same/similar questions – this will really show if a team is cohesive in its long-term plans from senior to junior, chief investment officer to analyst, or whether the individuals are deferring to a colleague or learning from a script.
