At Ellwood Associates, all of our Consultants conduct manager research functions and compile a diversified “qualified list” of investment strategies approved for client capital. It is crucial that all of our Consultants conduct manager research, utilizing their many years of experience. This structure ensures that our Consultants know the investment managers we recommend to our clients, having conducted the research themselves and participated in the due diligence process for every investment strategy on our qualified list.
To facilitate the efficiency of the research process and the excellence of our “qualified list”, Ellwood has four research teams headed by Consultants and supported by research analysts. These teams drive the research process, though the Consultant team leaders can research areas outside of their team as well as delegate research responsibilities to other Consultants.
The first step of the process is to use a multi-factor, proprietary model to screen databases (eVestment Alliance and Morningstar). The model screens on various factors such as performance measures, risk metrics, and valuation ratios ranking the investment strategies within the appropriate style universes. For equities, we screen on all regions (domestic, global, international - developed and emerging); on the full capitalization spectrum (large, mid, smid, small, micro and all capitalization); and on multiple valuations (value, core, and growth). For fixed income, we screen on maturity and specific styles (short term, intermediate term, core, core plus, long duration, high yield and specific fixed income sectors). The rankings are a guide to identify strategies with compelling factors. Ellwood Associates also identifies investment firms through other sources such as industry contacts, conferences, etc.
Specific qualitative characteristics we seek include:
- Organization/ownership stability
- Sustainable assets under management (>$250 million)
- Manageable asset and account growth
- Long tenured, experienced, incentivized investment professionals
- Consistent, repeatable investment process
- Consistency of investment style as verified using holdings-based analysis
- Best in class, risk adjusted, consistent performance net-of-fees versus style indexes and universes over various market cycles
- A GIPS compliant performance track record audited by a third party
If an investment firm and strategy pass our initial evaluation criteria, including meetings at Ellwood’s office, the Consultant sponsoring the strategy will take the necessary time to complete a thorough “due diligence packet”. This packet contains detailed quantitative and qualitative information on the organization, the investment process and the portfolio. When completed, Consultants review the packet before discussing at our weekly Monday morning Consultant meeting. After much debate, all Consultants vote if a manager on-site meeting is justified to continue the research process.
If warranted, two Consultants will conduct a due diligence meeting at the manager’s office further reviewing the organization, meeting portfolio managers and analysts, and evaluating the investment process and portfolio. After the on-site meeting, the sponsoring Consultant will report the findings to all Consultants who will challenge the sponsoring Consultant’s thesis on the manager. After much deliberation, all Consultants vote to continue the process. If accepted, the portfolio manager is then invited into our office for a “qualification meeting” presenting to all Consultants. After which, a vote is taken and if approved, the investment strategy is added to the Ellwood qualified manager list.
When completing a manager search for clients, only investment strategies on the qualified list are utilized. Consultants have the discretion to select the appropriate qualified managers for a search given the client's specific criteria such as risk tolerance and total portfolio structure.
Our manager research process has no conflicts of interest. Ellwood Associates does not receive revenue, in any form, from investment management firms as 100% of our revenue is from retainer based, hard dollar client fees.
On-Going Manager Surveillance
Through quarterly conference calls, e-mail, and on-site visits, our Consultants and analysts are in ongoing contact with “qualified” investment managers used by our clients. Through a formal quarterly surveillance program, our research teams monitor the critical attributes of the firm, investment process, the portfolio positions and performance. We publish quarterly one page manager surveillance reports including holdings-based attribution calculated in FactSet.
To the extent we see any changes or causes for concern we bring these issues to our clients' attention immediately with a recommendation for action when appropriate. This surveillance function assists our clients in fulfilling their fiduciary duties.