OAM looks for managers and funds that have unique characteristics that separate them from their peers. Rather than relying solely on quantitative screens run in third‐party databases—a process that is mostly backward‐looking—the Consulting Group values face‐to‐face meetings with investment managers as another useful tool. These meetings help us gain an in‐depth understanding of the managers’ investment philosophy and processes, thereby reducing the universe of managers to a short list worth closer examination. To identify suitable capabilities worthy of research, the team employs a mix of screens by asset class while also responding to referrals from colleagues within OAM, Oppenheimer and other industry peers.
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A proprietary scenario analysis tool helps us determine the potential utility of a strategy within the context of a given portfolio combination. The tool simulates the performance and diversifying effect of a strategy through varied time periods and market environments. Ideally, a prospective manager will exhibit low correlation to the existing manager lineup within a portfolio in order to generate productive, compensated diversification. However, no decision will ever rest on quantitative analysis alone: such analysis merely serves as an objective input in conjunction with qualitative evaluation. Together, the two approaches inform a comprehensive framework for decision‐making.
The manager research and portfolio construction team maintains an internal “watch list” that highlights areas of concern relating to any manager, including issues that might impact their ability to deliver consistent results over time. The team sets deadlines for the resolution of these concerns, and if the expected resolution does not occur, then the team considers replacing the manager. The watch list allows the team to anticipate the need for manager substitution and ensure prompt, smooth transitions.