Consider the following questions when hiring investment managers directly:
- What is the manager’s investment philosophy? Does the manager try to help you understand the philosophy, or just use terms meant to put off your questions?
- Does the manager pick securities from a preapproved list? If so, what is the justification or strategy for doing so? Can the manager reasonably assure you that this constraint will not sacrifice returns in the short term or long term?
- Does the manager know what is in their fund? Can the manager explain clearly why they hold a particular stock?
- Can the manager describe cases in which the market punished an investment style, yet they stuck by it? If so, what did the manager learn from the experience?
- How is the manager compensated?
- Does the manager have a track record of success? How is that measured?
- Does the performance record comply with Global Investment Performance Standards, or GIPS®?
- Is the manager a Registered Investment Advisor, or RIA, with the Securities and Exchange Commission?
- What is the firm’s history? What is the longevity of the portfolio manager with this strategy?
The Foundation Guidebook has more on investment managers >>
The Foundation Guidebook
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