Clarify Goals

Establish client’s investment objectives, including risk tolerance, return expectations, and investment horizon. This step guides the selection of active funds that match client’s financial goals and risk profile.

Set Criteria

Define specific criteria for fund selection, such as fund performance history, manager experience, expense ratios, and investment strategy.

Macro-Economic Analysis

Global and Regional Trends: Analyze global economic indicators, interest rates, inflation trends, and geopolitical risks to understand the macroeconomic environment.

Market Sentiment: Gauge market sentiment and trends, which can affect stock performance in the short term.

Sector and Industry Analysis

Sector Selection: Identify sectors with potential for growth or value based on macroeconomic analysis, technological changes, regulatory shifts, and other factors.

Industry Deep Dive: Within selected sectors, we perform a deep dive into industries to understand competitive dynamics, market size, and growth prospects.

Conduct Initial Screening

Performance History: We look for funds with a consistent track record of outperforming their benchmarks and peers over multiple market cycles.

Expense Ratios: Compare expense ratios, as high fees can erode returns. Consider the fund's cost relative to its category.

Fund Size: Evaluate the size of the fund, as both very large and very small funds may face challenges in executing their investment strategy effectively.

Deep Dive into Fund Analysis

Investment Strategy: Understand the fund’s investment strategy, including its asset allocation, sectors of focus, and any thematic approaches. Assess how well this strategy aligns with current market conditions and our investment philosophy and macro-view.

Fund Manager Analysis: Investigate the experience and track record of the fund manager(s), looking for stability in the management team and a clear, consistent investment process.

Risk Management: Examine the fund's approach to risk management, including how it diversifies its investments and mitigates losses during market downturns.

Evaluate Performance and Risk

Performance Metrics: Beyond comparing returns to benchmarks, consider risk-adjusted return metrics such as the Sharpe ratio, which measures return per unit of risk.

Volatility: Assess the fund's volatility in comparison to its benchmark and peers to understand the potential for wide fluctuations in value.

Drawdown Analysis: Look at the fund’s historical drawdowns to gauge how much the fund’s value has declined during past market downturns, indicating potential risk.

Review Fund Holdings and Turnover

Portfolio Holdings: Review the fund’s portfolio holdings to ensure diversification and alignment with the stated investment strategy.

Turnover Rate: A high turnover rate can indicate a more aggressive trading strategy, which may result in higher transaction costs and taxes.

Monitor and Rebalance

Ongoing Monitoring: Regularly review the fund’s performance, strategy adherence, and portfolio holdings. Stay informed about any changes in fund management or strategy.

Rebalancing: Periodically rebalance client’s portfolio to maintain their desired asset allocation, taking into account the performance of the active funds relative to client’s overall investment strategy.