Manager Selection

Discriminating Investment Skill from Market Noise

Finding the right managers for our clients is a particular strength of the Vantage Consulting Group. We utilize our scientific capabilities to review the historical performance of prospective managers in the context of their individual style to determine the accuracy and validity of their competence. At the same time, we spend time with managers in their offices and on the phone to obtain a thorough understanding of their approach, studying both the techniques they employ and the risks inherent in their use.

While it is far more difficult to evaluate people than to review answers on a questionnaire, our focus is to identify those investment professionals who can produce results for our clients. The result is a thorough database of managers from which particular portfolio strategies can be implemented.

This database is continually updated as part of our ongoing investment practice. New managers are introduced and existing managers are reviewed and periodically prompted for updates on their firm, its principals’ and their investment strategy. Ongoing statistical analysis helps us differentiate between random volatility (noise) and truly anomalous manager performance allowing us to focus our energy addressing managers or strategies with performance outside the range of normal statistical expectation. Qualitative and quantitative manager scoring is imbedded in our proprietary manager template which has been developed over the last 20 years to help Vantage identify managers with real skill and the potential to add-value, from the horde of potential investment managers.

Scoring the game should involve more than just counting the runs. We seek to go beyond the numbers of a manager or a portfolio of managers, and explain the whys of manager and portfolio performance.

It takes constant oversight in order to differentiate investment skill from general market performance. A rising tide may lift all boats, but when the tides change, only the skilled captain will stay afloat. At Vantage, our careful evaluation of manager skill is critical to the success of the program. We work to understand why a manager performs the way he does, and to assure that he is adhering to the investment discipline for which he was hired.

Vantage monitors each manager in the context of his stated role in the overall program, and appropriate benchmarks are used to evaluate an individual manager’s contribution to the risk and return characteristics of the overall portfolio. Vantage is in regular contact with all managers charged with investing client money, and, when the situation warrants, we require managers to report all account activity on a daily basis in order to ensure appropriate oversight and risk control.

In short, we know our investment managers. We know what they are doing, we know why they are doing it, and we can explain and match client portfolio needs with the appropriate mix of managers.