Manager Evaluation and Selection Methodology

An Evaluation Process Unique in the Consultant/Advisory Community.

Beacon Pointe Advisors’ most distinguishing characteristic is our depth and breadth of talent and experience in our industry. This has given rise to our unique and research-intensive methodology in an open architecture environment:

Search and Evaluation of Investment Managers

Identifying and researching what we believe to be superior investment managers is our core competence. Our manager recommendations are a crucial component of the value-add that we provide to our clients.

Beacon Pointe’s recommended money managers are not limited to the ‘style-box’ approach of huge investment houses. They invest for stability and growth, yet are nimble enough to take actions that help achieve their clients’ goals. They move beyond market benchmark weightings and style box constraints and focus instead on finding what they believe are the best investments for their clients. As a result, they tend to protect capital better than their peers when markets are negative.

Our proprietary process relies on a sound philosophy, rigorous due diligence efforts, and state-of-the art analytical tools. It includes the following steps:

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  • Manager Sourcing – from referrals, industry contacts, manager databases, and directed outreach.
  • Quantitative Analysis – a thorough assessment of manager performance with an emphasis on long-term consistency, risk-adjusted returns, downside protection, and peer group ranks. Beacon Pointe requires GIPS compliance and verification of all manager candidates.
  • Qualitative Analysis – meetings with Portfolio Managers, completion of Beacon Pointe’s Investment Manager Questionnaire, interviews with analysts, and an exhaustive review of the firm’s ownership and compensation structure, investment philosophy, portfolio construction process, risk controls, research and back-office resources, and trading capabilities.
  • Portfolio Analysis – holdings-based style analysis and historical attribution analysis; in-depth discussions regarding specific portfolio holdings; on-site visit with full access to the firm’s records, valuation models, personnel, and research reports.
  • Product Evaluation –reference checks, review of manager’s Form ADV, negotiation of management fees, account minimums and final scoring and research.
  • Beacon Pointe Investment Committee Decision – a careful review at the highest level determines if the manager qualifies for our Focus List or is moved to our ‘Manager Bench’ for later consideration.

Smaller RIAs may not have the resources to devote to such efforts. Most simply recommend managers that are drawn from a large commoditized platform. They allocate among mutual funds, and the primary flexibility they can offer is the ratio of stocks to bonds. This often results in market-tracking returns, a result that most clients could largely achieve on their own.

Our Investment Process

The Beacon Pointe advisor initiates the investment process and seeks to fully understand the needs, circumstances, priorities, and goals of each client. Clear financial objectives are then established for the accumulation, preservation, and perpetuation of assets tailored specifically to the client’s needs.

The full process includes:

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  • Investment Policy Creation and Review
    The advisor creates an investment policy that reflects the client’s specific situation. It is individually reviewed and approved by our Investment Committee as appropriate for the client’s needs and circumstances.
  • Asset Allocation
    With the client’s approved investment policy in place, sophisticated techniques are employed to determine an optimum asset allocation mix to achieve the client’s objectives.
  • Manager Recommendations
    Finding the best money managers in each asset class requires significant effort and focus. The client’s investments will draw from our Focus List, comprised of a select group of firms that meet or exceed our strict performance and qualitative criteria (see above).
  • Manager Monitoring / Performance Measurement / Attribution Analysis
    Asset allocation strategies and selection of managers are only the initial steps for a successful investment plan. Periodic review of needs, circumstances, and requirements for asset allocation, combined with monitoring of managers selected, is critical to the ultimate success of the investment plan.

Keeping Clients Informed and Knowledgeable

We perform vast amounts of research to drive our internal processes on our clients’ behalf. In order to keep our clients informed and knowledgeable, we are happy to share with them our research reports and market letters. Learn more in our Article Center.