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.

The EQIS Investment Committee follows a robust due diligence process which helps them evaluate four critical criteria as follows:

1. Positive performance relative to an index

Money managers typically choose an index to form a basis for performance comparison. Based on strategies, holdings, and methodology, EQIS might compare a money manager’s performance to other indexes as well. EQIS typically requires a minimum three-year, real-money track record which it will evaluate relative to the index(es). Some money managers, such as tacticians, may operate low-correlation strategies and therefore contend their returns should not be compared to an index.

In these instances, the EQIS Investment Committee will examine the money manager’s success at avoiding downside market capture while maintaining growth. Further consideration will be given to the number of successful market calls the money manager’s track record is based upon, and in particular seeking to avoid “one hit wonders.” The more accurately a money manager tracks an index or protects against downside capture, the more confidence the EQIS Investment Committee will have in the money manager’s record.

2. Logical investment philosophy and methodology

For this criterion, the EQIS Investment Committee asks: “Does the money manager’s strategy make sense?” For this, the Committee primarily is looking for red flags within the money manager’s strategy and execution. For example, if a money manager claims to follow a simple moving average trend-following system that is known to work well in trending markets but poorly in choppy markets, the Committee will not accept strong performance during trending markets as indicative of the strategy’s long-term value or ability to outperform in the future.

3. Replicable process to implement investment methodology

The investment strategy should adhere to a methodical and disciplined process, whether based on technical or fundamental analysis. Securities should not be selected merely on an individual’s hunch or gut feeling. The Investment Committee will review the strategy, whether quantitative or qualitative, and assess the reliability of the process.

4. Stable and experienced portfolio management and business management teams

The EQIS Investment Committee reviews the overall experience of the money manager’s team which includes total years of experience, team turnover, and experience managing the portfolio strategy under review. In situations where a money manager is experienced but only has a short-term track record managing the strategy under review, the Committee may ask the money manager to reapply after achieving a longer track record with the strategy. The final decision to accept or reject a money manager and, subsequently, individual portfolio strategies is made when taking all relevant data and criteria into consideration.

Ongoing Review

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.

Removing Managers

Money managers and/or portfolio strategies can be removed for a variety of reasons. For example, strategies that indicate a deviation from our criteria during our ongoing review are put on a watch list and may be restricted from accumulating additional assets. If the EQIS Investment Committee continues to determine that a money manager and/or strategy should remain on the watch list, especially if they persistently suffer poor performance or experience manager turnover, then the manager and/or strategy will eventually be removed from the platform. Managers may also be removed if they drift from their self-mandated asset class, equity style, geographic focus, investment philosophy, or other representations made by the money manager during the initial due diligence process.

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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