Page 12 - PSK Q2_2022_Thomas Ilinkovski

Selection process Given the focus on being forward-looking,
Taking into account the investment policy,
the selection process encompasses a
number of steps. The process is flexible in
terms of order of execution, and the
emphasis placed on each element of the
process may vary depending on the
parameters and market conditions, and to
ensure due consideration is given to
strategies that may be innovative and
appropriate to evolving circumstances.
1. Consideration of the parameters for
each portfolio (investment universe)
Clients will usually provide an objective
which includes parameters or specific
requirements. There will be times where
this does not happen; however, this is quite
rare. Where this does occur, it is important
to attempt to extract any biases or
predispositions that could cause
complications at a later date.
Where no requirements or parameters are
provided, our investable universe is guided
by the objective of the portfolio. This can
result in both a very large or very small
universe.
Where the universe is overly large, we will
screen-out managers and products based
on an assessment of best practice and the
identification of an investment edge. Where
the universe is so small it hinders sound
portfolio construction or meeting of
objectives, we will re-engage with the client
to ensure they are comfortable with the
direction of process and analysis.
2. Qualitative and quantitative analysis
Whilst the analysis and assessment of any
product is somewhat backward looking, our
analysis aims to be as forward looking as
possible. This includes a particular focus
on whether the product and manager’s
success is repeatable, whether the market
environment now and in the medium term
is conducive to the manager’s style of
investing, and whether the team dynamic
and quality staff will remain with the
organisation into the future.
that means that approximately 80% of our
time is spent on the qualitative assessment
with the remaining 20% spent on
quantitative analysis.
3. Consideration of research from other
sources
This includes review and analysis of data
from sources such as retail research
houses, institutional research coverage
and broker reports.
4. Meetings with fund managers
On a stand-alone basis, this is the most
important part of the research and
selection process, as it allows detailed
investigation into their philosophy and
management style.
Meetings with portfolio managers are
focused on ‘5 p’s’:
a) people
b) process
c) parent
d) price, and;
e) performance.
Meeting with senior analysts or other key
decisions makers is especially important
where there is a team-based approach or a
flat hierarchical structure is prevalent. For
example, where a strategy derives the
majority of idea generation and/or alpha
from particular part of the market, then that
analyst/sector head should be engaged
with. Where there is quite a heavy top-
down approach and a senior economist or
an external consultant is used, they will
also be an integral part of the discussion.