 |
|
 |
||
Home
A Conversation With |
Benefits and Pensions MonitorGetting Comfortable With Your Money Manager
When you talk to a plan sponsor who has just been through the process of hiring a new money manager, you get a lot of explanations as to how they arrived at their decision. But once you strip away all of the quantifiable reasons about performance and relative standing, the word you hear most often is that the plan sponsor felt “comfortable” with the money manager. And that is as it should be. In a world of money managers changing names, staff, and structure, and in a place where hedge fund managers appear (and sometimes disappear) overnight, the idea of trust becomes even more important. But this is counter to a typical selection process where much time is spent by plan sponsors and their consultants looking at a manager’s past performance. Establishing a personal fit with a manager is relegated to a face-to face meeting that rarely lasts more than an hour or two. The question, then, is whether this is enough time to learn all that you need to know to establish whether you are comfortable with the firm and its individuals. Think about the time you spent hiring your last employee. After your HR department winnowed through the resumes, you probably met the potential candidates on several occasions. Maybe HR did an initial further cut, then you and a group of your peers met some candidates in a formal setting. After this may have come several oneon- one meetings, maybe over a meal. Maybe you had the short-listed candidates meet with their future direct reports. At the same time, you are likely calling references and asking around in your industry for any feedback. Good Feel The point is that you spend a lot of time trying to get a good feel for your next employee to join your team. So shouldn’t you be spending just as much time trying to get comfortable with the next money manager you hire? What are some of the non-performance based factors you want to look for to aid your comfort level? They can include:
Talk To Other Individuals You can talk to other individuals in the money manager’s organization, other than just the client contact and one or two analysts. Meeting with more of the staff, such as the company’s CFO, can give you ideas about that firm’s back-office and infrastructure. And why let them come to you? It can be more worthwhile to go out and walk through their shop. You can check references that the manager provides (including both longstanding clients and new business) and seek your own from your consultant, from past employees in that firm, from other money managers, and from anybody else you can (custodians, your own industry colleagues). Unlike the quantitative part about past performance, there isn’t really a checklist to assess whether a money manager is right for you at this time, nor should there be. Spending as much time on manager searches as you do on employee selection won’t guarantee success, but it will cut down on future surprises. After all, you don’t want to suddenly find yourself in the story that Yale University’s CIO David Swensen tells about the plan sponsor who, when checking a manager’s background, was told too late, “He is a great money manager…when he stays on his medication.” Jim Helik is co-author of ‘Energy Markets Risk Management,’a textbook published by the Canadian Securities Institute. He also teaches at the School of Business, Ryerson University in Toronto. |
|
Home / News Alerts / Archives / Classifieds / Events / Directories / Resources / Subscribe / Login / Contact Us Copyright ©1999 - 2008 Benefits and Pensions Monitor. All rights reserved. |
||
