Understanding the Mutual Fund selection process for you?

For many of our wealth management clients, we will gain exposure to certain asset classes through hiring different mutual fund managers. There are thousands of different options to choose from so selecting a mutual fund can be a difficult task for many investors. You will have to gain an understanding of different fund's track record, expenses and other publicly available information is a good starting point for a fund evaluation, but you are just scratching the surface. We will certainly have to go through an in-depth quantitative analysis, but we are also placing an emphasis the qualitative analysis. In fact every mutual fund has a portfolio manager with a team that is working toward a specific investment objective. We are always looking for a some permanent attribute about the manager or their investment process that will add value and diversify the investment portfolio. We are constantly trying to find those managers and enjoy the challenge of discovering and viewing them as partners, that we are going hire for a long-term relationship.In order to select the right fund managers for our portfolios, we will combine both quantitative and qualitative analysis. Using our quantitative analysis allows us to search through the top managers in each specific category. As we gathering different data points that will allow us to compare the fund to their peers and industry benchmarks, with regards to risk profile, performance, and fees just to name a few. This information will allow us to conduct a through qualitative analysis, where the vast amount of time is spent. The qualitative data research will help us to understand what is driving the fund managers results to distinguish what skill set is present. Our qualitative analysis focuses on learning about the manager's background and investment processes through interviews, or past investor communications, news wires, and using our industry experience. We are looking to understand how a investment manager thinks about the macroeconomic view and how they evaluate investments. We are seeking out managers who are driven and deeply motivated and have large presence in the success of their fund. The most prevalent traits of investment managers that we allocate assets to is steady temperament, driven, humility, and transparency with a continuous need to improve their process. They need to have confidence in their ability to execute on their investment strategy and remain disciplined over a full market cycle. Due diligence takes several months if not several years to before we are comfortable allocating our clients assets to a fund manager.Our work does not stop once we select a fund manager. We are keeping track of decisions, to ensure that the manager remains disciplined, and we are looking for any red flags. We are continuously reading shareholder communications, listening to conference calls, review fund changes, and sometimes we schedule a call with manager to understand a change. We will only allocate assets to managers when we conclude that the investment process is intact and very effective over the long term. But, sometimes things change and the investment process changes or the fund manager skill set breaks down. Also, we are constantly looking for new investment managers and will seriously consider replacing a fund manager when there may be an opportunity to strengthen our clients portfolios.Also , everything that we have discussed above is all for nothing without having patience. It is difficult to predict how any manager will do in the short run. Chasing or bailing on a manager based upon recent performance is usually a wealth-eroding endeavor. We understand that certain management styles will come in and out of style throughout numerous points in the economic cycle, however we are committed to investment managers for the long-term and we systematically build durable portfolios designed to handle the markets volatility. Enclosing, we also realize when a fund manager is going through a difficult period, we come back to evaluating the process. There is an intensive focus on whether the process has changed in a way that is the opposite of why we invested in the first place. With all of the elements involved in investing, we emphasize the process over the outcome and this will be true when it comes to mutual fund evaluation as well.Thank you,John C. Verducci 111 - Verducci Asset Management