The unseen screening process

As your adviser, our priority is to ensure your investments remain robust and aligned with your long-term goals. Changes to the underlying investment portfolio might not be frequent, and it may sometimes feel like not much is happening, but there is a great deal of work going on behind the scenes. Our Investment Committee (IC) is constantly researching, reviewing, and challenging our investment approach - making changes only when we feel confident that they genuinely improve your portfolio, not just to appear busy. This disciplined oversight is designed to keep your portfolio in the best possible shape.

One such important role of our IC is to ensure that the products recommended to you at part of your portfolio remain ‘best in class’. This involves running a comprehensive product screening and due diligence programme every year, designed to identify and maintain only the highest quality investment options for you. The process is extremely thorough, with around 800,000 investment opportunities analysed, hundreds of data points screened, and tens of millions of unique pieces of data reviewed to get the job done properly.

The graphic and subsequent points below are a whistle stop tour of how our screening process works, step by step.

Figure 1: Our product screening process

 

 Source: Albion Strategic Consulting.

Data cleansing

Before we begin to assess investment options, we make sure the data we use are accurate and complete. This involves checking and combining information from multiple sources, removing errors, and filling gaps where possible. If data are missing or unclear, we’ll seek out alternative sources, run calculations internally, or contact the provider directly to ensure we have the right information.

Screen 1

We start with a wide net - hundreds of thousands of investment products. Our first screen applies basic criteria, such as whether a product is available for sale locally or meets a minimum track record and scale. We measure how well index funds track their stated benchmarks - for example - as well as identifying the appropriate geographic exposure. This helps us quickly narrow down the options to those that are relevant and suitable for our clients. We review our criteria annually to ensure that they are still sensible.

Long Lists

After the initial screen, we arrive at “Long Lists” for each investment asset class (such as developed equity, emerging equity or short-dated bonds). These lists include all products that pass our agreed criteria, and we keep a record of why each was removed at this stage or progressed as appropriate.

Screen 2

Next, we apply more detailed analysis and algorithms to the Long Lists. This might involve comparing products on factors like all-in cost, investment styles, retail availability, product type and data transparency and removing those that don’t measure up. For example, if a fund is much more expensive than similar available options or lacks key data hindering our ability to assess its structure, it won’t make it through this stage. Transparency is a key consideration in our investment approach.

Watch Lists

The result is a “Watch List”. These include the very best potential products within each investment category. These are the products we consider the most suitable options for inclusion in client portfolios. We review these lists at the IC level, firstly to check that the products we recommend meet these standards. If not, this leads to a further investigation. Secondly, to explore whether any alternative products on the list may offer a superior solution for our clients moving forwards.

Investment Committee (IC) review and due diligence

Our IC conducts further due diligence and analysis on any product that looks like a candidate, including both internal and third-party analysis as well as materials directly from the product provider. Decisions either to stick as we are or change are signed off at the IC meetings.

Little details matter because investment landscapes change - what made for an evidence-based portfolio twenty years ago looks different to today. By paying close attention through time, we position your portfolio to be in the right place for the next twenty years and beyond without cutting corners. We’ll always communicate any changes to you clearly and explain the reasons behind them.

"There’s a way to do it better - find it." Thomas Edison to his staff (allegedly)

 

Best wishes

 

Risk warnings

This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product.  Reference to specific products is made only to help make educational points. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed. 

Past performance is not indicative of future results and no representation is made that the stated results will be replicated.

Errors and omissions excepted.

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