Integrated uses PSN analytics and Morningstar to screen potential managers. These resources contain information on over 2,600 investment advisory firms and 20,000 investment products covering the growth, value and core investment styles in large, mid, small, and microcap domestic equity, developed and developing international managers, real estate, fixed income and alternative investments. It is updated quarterly and includes both U.S. and non-U.S. based investment firms.
Our databases include information on a manager’s headquarters and contact information; current assets and client information; ownership information, whether it is employee, private, parent or publicly owned; the number of members in management and research and their relative experience; a firm background narrative; a product summary; client turnover; portfolio characteristics; investment strategy; management turnover and portfolio construction methodology.
In order for a registered investment advisor to be considered, Integrated imposes general guidelines regarding the firm’s size and resources, the tenure of investment personnel as it relates to the quality of the firm’s published track record, in addition to the quality of its investment process. This is what we collectively call the 4 P’s: People, Process, Philosophy and Performance.
Because of the scope of our initial review process, it is not unusual for an addition to our roster of managers to take several months from start to finish. It is also not unusual for us to perform an exhaustive analysis and then decide to pass on a particular strategy if there is something uncovered with which we have become uncomfortable. At the end of the day, we are confident that our review process is necessary and prudent, that it is comprehensive, discerning, and an important benefit that we provide to our clients.
Size – Integrated focuses its efforts on investment firms that have accumulated (through a combination of attracting assets and generating positive returns) a level of assets that affords us assurance that they have the financial resources to provide a stable, high-quality investment product. We want them to be in a position to pay competitive salaries to and retain their investment and operations personnel, to have adequate systems in place to manage hundreds of accounts in an efficient manner.
Tenure – Integrated would like a firm’s current investment team to have been working together for a minimum of 10 years with personal responsibility for an equally long performance track record that is compliant with generally accepted standards for performance presentation. We have chosen to add strategies that either have not been in existence for a full 10-year period, or where certain investment personnel changes (additions and deletions) have occurred during the strategy’s tenure. We have done this when we have found particularly compelling strategies determined to be appropriate for our clients, despite not having the desired history. Nonetheless, we prefer tenured investment professionals, who while working together, have created an attractive long-term record of success.
In Integrated’s opinion, the only way to make an educated assessment of a firm’s people, policies, and processes is to keep asking questions. Some questions we ask on a recurring basis. We will ask different people the same question or ask the same question periodically in order to ensure that everyone at the firm responds with a similar message and that the message remains consistent over time. Also, we want to be the first to know when changes occur at a firm. We do not necessarily view change as negative, but we do want to be informed in order to determine an appropriate response in a timely manner. We believe our financial consultants and their clients deserve to be kept informed.
As a complement to the core work Integrated does on the qualitative side, our quantitative analysis also continuously reviews and assesses the results-oriented aspects of each strategy. This effort could be best described as a mosaic of separate analyses conducted on each portfolio and the trades that define each portfolio. Quite often our objective review work leads us to follow up with questions for money management personnel. Consequently, our analysis comes full circle as our qualitative and quantitative efforts play off of each other.
A byproduct of Integrated’s portfolio review function is our ability to monitor a portfolio’s adherence to stated parameters and thresholds. For example, a portfolio may have a stated objective of maintaining a portfolio yield above that of the S&P 500 Index, or a long-term expected earnings growth rate for the portfolio at least 10% higher than that of the Russell 1000 Growth Index. Another portfolio may limit sector exposure to 1.5 times that of the same sector in the Russell 2000 Index. If and when a threshold violation occurs, we can follow up with the money manager to understand and assess the circumstances.