No stone unturned
Glen Finegan’s recent appointment as manager of the Global Emerging Markets fund followed a 500-hour vetting process, writes Nathan Gelber of Stamford Associates.
Our manager research and monitoring process at Stamford Associates has been developed over the last 30 years to be forensic in nature and relentless in application.
It was no different last year, when we investigated the suitability of Glen Finegan of Henderson Global Investors as the new lead manager of the St. James’s Place Global Emerging Markets Fund. Following our recommendation, the St. James’s Place Investment Committee appointed him to the post in October.
The first stage of our research is to conduct a review of the eligible manager universe. Over the years we’ve built a database of about 5,000 managers who we’ve researched and this forms our starting point. We have already selected some to work with, while we continue to monitor others for such a time as the Committee decides to introduce new strategies.
The majority of our research and assessment of Glen Finegan was conducted over a six-month period and involved 17 meetings with Glen and his investment team, his superiors and Henderson’s business managers, including the chief executive and chief financial officer. We also met and interviewed ex-colleagues, obtained references, attended Glen’s internal investment meetings and observed him meeting with senior executives of one of the companies in which he invests. All of these meetings are documented and cross-referenced within our database.
Our due diligence included the review of over 750 pages of documentation from Henderson. Our own pre-meeting internal notes amounted to more than 100 pages and 40,000 words.
Our analysts devoted several days to assessing Glen’s investment footprints, by studying his portfolios and transactions whilst he worked at Henderson and in his previous employment. Using the results from that analysis, we prepared case studies as a basis for testing Glen’s investment process. This, together with telephone conversations, emails and internal discussions, led to our formal manager recommendation to the Investment Committee.
The Committee’s subsequent assessment of the proposition, which included a meeting with Glen, ultimately resulted in the appointment of Glen and his team. We estimate that we invested more than 500 hours on this particular manager research and evaluation exercise.
Tried and tested
No two managers are identical and, nor are their assessments, but our process does follow a carefully designed and well-trodden path to ensure that our due diligence is comprehensive. Knowing that the past is not a reliable guide to the future, we look for evidence of the efficacy and repeatability of the investment processes of the manager, since that offers a guide to their prospects of delivering attractive returns over the longer term.
This involves gathering and analysing intelligence on their portfolio transactions. We also focus on the experience, talent and working environment of the key investment professionals. Finally, we study the manager’s behaviour. These investigations allow us to form a clear view of a manager, and one which is not simply dictated by past performance.
While the eight managers we recommended to the Committee in 2016 represent a diverse group in terms of location, size, background, investment strategy and mandate, they all share the fundamental long-term investment philosophy that is one of the foundation stones of the St. James’s Place approach to investment management. The managers also share that passion for investment which we view as a prerequisite for investment success.
In our experience, the higher the quality of the input, the more informed the output. This is especially true when the output is in essence a binary decision by the Committee over whether to appoint a new manager or over whether to retain an incumbent manager. These decisions are never taken lightly and are based on considering all conceivable evidence that is available at the time.
Stamford Associates is an adviser to St. James’s Place.
The opinions expressed are those of Nathan Gelber of Stamford Associates and are subject to change at any time due to changes in market or economic conditions. This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any strategy. The views are not necessarily shared by other investment managers or St. James's Place Wealth Management.
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