To facilitate an open environment, Concord subscribes to databases,eVestmentAlliance (approx. 1,200 management firms, and 6,600 investment products), and Morningstar(approx. 6,500 mutual funds). Our internal database is culled from these larger databases and Concord's screens are based on quantitative and qualitative factors. Among many factors, the three main criteria for inclusion in Concord's database are:
- the firm must have a structured, consistent, and proven investment process;
- the firm product's performance must be competitive with comparative indices and manager universe statistics.
A large part of maintaining useful databases is understanding what is happening behind the scenes at asset management firms. To gain this knowledge, Concord's staff conducts over 250 personal meetings with managers each year. These are performed both at Concord's facilities and at the managers' offices.
All of our firm's recommendations concerning managers are approved by our Investment Policy Committee. All voting members of this committee have in excess of fifteen years of experience monitoring, evaluating and selecting investment management firms. Concord's Investment Policy Committee (IPC) is comprised of seven members, and is headed by Concord's Director of Research (Paul Laux). This Committee meets bi-weekly to discuss issues that are pertinent to our client's portfolios. The IPC establishes the direction of the firm's research activities, as well as developing broad-based recommendations for our clients.
In conducting a search Concord will run preliminary screens from both internal and external databases. After narrowing the universes to all management firms who can facilitate the client's needed asset class, a second set of screens are run. These screens are quantitatively driven, focusing on performance consistency and average margin of relative performance over a stated benchmark. Concord's minimum performance criteria are typically based on rolling three-year periods measured each and every calendar quarter for at least five years. To be considered for selection, a firm must have a positive average margin in excess of a normal management fee, in addition to having a successful record of exceeding a comparative benchmark over multiple rolling three-year periods.The structure of this ranking system eliminates firms with a single period of exceptional performance, in favor of firms that demonstrate an ability to out-perform their benchmark on a consistent basis.
The next stage is to reduce the prospective manager list down to the top ten firms. This involves our firm utilizing both quantitative as well as qualitative criteria in the selection process. The quantitative criteria include measures of volatility, risk-adjusted returns, correlation with other client managers, and up market/down market capture ratios. The qualitative criteria include management stability, firm structure, portfolio structure, pricing and client service. Based on Concord's analysis, our firm will recommend three to four firms to be interviewed by the client for final selection.
