There is no shortage of product options available to advisors in today’s market. In the U.S. alone there are more than 9,000 mutual funds, 1,400 ETFs, and 7,000 separate account strategies. The trick, of course, is to separate the wheat from the chaff.
Logia relies on a comprehensive research process that distills the universe of manager options down to a select set of strategies that are used to populate the programs we manage.
Step 1: an objective review of key criteria that reduces the overall universe to qualified alternatives. Preliminary screening is done on managers that appear to have a consistent style and value-added performance. From there, a review of information regarding fees, operational issues, legal problems, turnover of staff, assets under management, and asset flows is conducted to reduce the universe further.
Managers that meet the requirements in the first step complete a detailed questionnaire, provide GIPS compliant performance, and furnish actual portfolio holdings for a more in-depth analysis. The analysis seeks to answer two key questions: (1) Does the manager do what they claim to do? and (2) Does the manager deliver on what they profess?
Step 2: an analysis of performance relative to benchmark, market cycles, risk, peers, and style. Peer analysis is conducted using a process called Portfolio Opportunity Distributions (PODs), that correct for peer group biases such as survivorship, composition, and classification. PODs rely instead on a comparison to all realistic portfolios that can be constructed from the constituents of a specific index.
A variety of data sources and analytical tools are used for further quantitative analysis. One of the key objectives is to identify managers that demonstrate security selection skill, as opposed to those who have outperformed based on factor or style bets. This gives us a higher degree of confidence in persistency in future performance.
Step 3: a qualitative assessment on the philosophy, people, and process of candidate managers to build confidence in a manager’s organization and sustainability.