Manager Selection: Observations & Lessons Learned

Manager Selection: Observations & Lessons Learned

Jeffrey Heisler, CFA

Senior Director TwinFocus Capital Partners

#GIPS15

Topics

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Due Diligence Process Manager Experience On-site Visits Transparency PM Investment Lessons Learned

Introduction

? Manager Selection

? Combines Quantitative and Qualitative Analysis ? Investment and Operational Due Diligence

? But is also idiosyncratic, there is no right way

? Decision-maker's Philosophy ? Decision-maker's Experience

? Personal Observation & Lessons

? Reinforce key objectives of due diligence process ? Highlight limitations

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Due Diligence Process

The goal of due diligence is to gain sufficient confidence that the manager's track record is real and representative of the returns expected to be realized.

? Would your process pass your process?

? Repeatable? ? Philosophy, Process & Personnel

? Awareness of biases

? Representativeness ? Availability ? Constraints

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Manager Experience

"Character is not made by crisis. It is only exhibited."

? Robert Freeman

? Not all experience is equal

? Event risk ? Risk management discipline ? Business risk ? Liquidity risk

? Suggests that tenure and fund size are necessary but insufficient considerations

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