Research
When we work with our clients to structure alternative portfolios, we do not view alternatives as a basket, but address our clients' unique circumstances and needs to determine the strategies that are most appropriate for them. This work includes efficient frontier modeling, upside and downside performance analysis and the probability of meeting the stated investment objective with and without the allocation to alternatives.
Ellwood Associates has a team of investment professionals who devote a substantial amount of time to researching alternative strategies and managers. In addition to utilizing a purchased database for initial screening of hedge funds and fund of funds, we also have proprietary databases for both hedge funds and private equity managers. Our team meets with numerous firms throughout the year in our offices as well as on-site at the manager's office. All manager due diligence is conducted by consultants, supported by the efforts of dedicated analysts.
When evaluating strategies we divide alternatives between return enhancement strategies designed to increase returns, such as private equity, and risk reduction strategies designed to provide capital preservation, such as real estate and hedge funds. Both strategies are not appropriate for all clients and therefore it is imperative to develop alternative portfolios on a case-by-case basis.
Manager Selection
As Ellwood Associates' has absolutely no conflicts of interest, we are able to take an unbiased view when evaluating alternative investment managers. Our alternative investment group researches both direct private equity, hedge fund, and real estate managers as well as fund-of-funds vehicles in these areas. While it is important to conduct a high level of due diligence on traditional managers, the evaluation of alternative managers requires an even higher level of due diligence. When evaluating firms, we focus on top-tier experienced managers. We also pay extra attention to private placement memorandums to assure that our clients invest with managers who offer reasonable fees and contract terms.
Ongoing Monitoring
Once a manager is included in a client's portfolio, we continue to conduct manager due diligence. We speak to the managers regularly and receive performance information monthly. Because of our relationship with the firms that we work with, we have access to the key decision makers at each organization. In addition to telephone conversations and meetings in our office, we meet with the managers in their office frequently to monitor the investment process. For example, for a hedge fund manager, we will monitor a manager's style consistency and for a private equity manager we will review the manager's deals to make sure a venture capital firm is not investing in only buy-out deals.
Special Services
Alternative managers have unique circumstances that do not exist with traditional managers. Hedge fund managers typically have lock-up periods and we will therefore help our clients manage their liquidity needs and navigate each manager's lock-up schedule. Private equity managers have draw-down periods and we advise our clients on the optimal way to manage draw-downs and invest the un-drawn committed assets in the interim. We also review all private placement memorandums for our clients and help them with the time-consuming alternative investment partnership agreement process. As many clients have limited personnel resources, Ellwood Associates' acts as an extension of Staff to facilitate the process of investing in alternative strategies.