Money Manager Due Diligence
EQIS Due Diligence
At the heart of informed decision making is rigorous, exhaustive research that persists over time and through market cycles.
Rigorous Due Diligence
Our money managers are heavily vetted through our rigorous four-point due diligence process. A diversified portfolio of multiple, complementary sub-advisers can reduce risk and may increase returns in the long run.
EQIS uses a comprehensive due diligence process to understand the inner workings of each sub-adviser. We conduct ongoing oversight of each sub-adviser and strategy so that we understand what trends or market conditions a strategy would be affected by. We understand that not every strategy will perform well in every market condition, so we pay special attention to understanding the investment process and the market conditions for which it was built.
How sub-adviser strategies fit together is important because we want to optimize the strengths of each to meet an investor’s goal while mitigating the impact of conflicting strategies. A thoughtfully curated portfolio across strategies and our four pillars of diversification allow each component to complement the others to attain the desired investment result. It is the weighting and the blend of these managers that matters. Each sub-adviser’s strategy plays a critical role in the whole allocation, and each has a specific job to do.
We look to see that a sub-adviser’s investment methodology is based on analysis and on a process that is consistent and can be reproduced. Our goal is to gather insight into how these sub-advisers created their portfolio performance and anticipate future portfolio behavior. In addition, we review both the firm’s organizational structure and its management team to determine if any major changes have occurred because this can affect repeatability. Examples of items we monitor include tenure of management, management responsibility changes, variance in the execution of a strategy, changes in ownership structure, and disaster recovery plans.
We consider performance to be important, of course, but we also consider it to be an outcome of predictability and process. A continued review of performance helps EQIS identify when a strategy is not working as expected.
Money managers come to EQIS through introductions made by advisors, direct requests by the portfolio managers themselves, and EQIS internal research. A money manager will undergo an initial vetting process that evaluates the offering considering, without limitation, the investment vehicles utilized (e.g., individual equities, ETFs, or mutual funds), the life cycle of the strategy, and its performance relative to the disclosed index or benchmark. If the money manager passes the initial screening, we will request information regarding portfolio returns, GIPS compliance, risk statistics, pitch books, fact sheets, principal backgrounds, company data, and other information, which is then sent to the EQIS Investment Committee for consideration and final decision.
If approved and added to the Freedom Advisors platform, the portfolio strategies undergo ongoing review during which the EQIS Investment Committee continues to evaluate each strategy’s adherence to its represented management style and philosophy. In addition to a review of the money manager’s consistency with EQIS criteria, the Committee will review the strategy’s assets under management to determine demand or interest. If a money manager is underperforming or not generating interest from investors and advisors, EQIS will evaluate various factors to determine whether the strategy should remain on the Freedom Advisors platform. It is important to note that we do not have a sensitive trigger. We believe in long-term investing, and typically give a money manager a market cycle to navigate different conditions before removing a portfolio from the platform.
At EQIS, our goal is to deliver the highest quality portfolio management to our clients, and with this money manager due diligence process in place, we are confident in our ability to meet that goal.
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