Screening by historical record and investment style, the prospective client
develops a "long list" of potentially suitable investment counselling
firms. The prospective client asks the investment counselling firms on this "long
list" to answer a "questionnaire" which asks detailed questions
about the firm's organization, capabilities, investment philosophy and process.
Culling down the "long list" to four to six potentially suitable
firms, the prospective client arranges a "short list" presentation
where she interviews the management and key personnel of the investment
counselling firms. The prospective client then chooses a manager from the short
list candidates.
At this point, it is obvious that selecting an investment manager is a very
time consuming process requiring quite a bit of expertise and knowledge. This is
why most large clients hire an "investment consultant" to help them
select and review their investment managers. Very large and sophisticated
corporate funds usually hire an investment consulting and performance
measurement firm such as Frank Russell or SEI. Large actuarial consulting firms
such as William Mercer and Towers, Perrin have "asset management"
teams which perform the same function. These firms maintain data bases of
investment counselling firms' performance and maintain up to date files on the
characteristics of each firm. These firms bill their consulting services on a
fee basis or act on retainer for their clients.
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