We place paramount importance on selecting the best fund managers to partner with, and have leveraged data and technology to build a rigorous framework for manager and product due diligence. As we do not take trailer fees from products on our platform, we always act in your best interest. Our goal is to build portfolios using the best products.
Firstly, we look for fund managers who share our investment philosophy. They believe in the efficiency of markets, rather than trying to outguess other market participants, and seek higher expected returns over the long-term to add value over benchmarks and peers.
We then apply quantitative screens to find funds that have outperformed their peer group and benchmarks over various periods of time. Generally, we would require a track record of at least three years, but we can also look at fund managers who have run similar strategies in the past. We consider performance consistency, volatility and downside risk relative to their peer group and benchmarks. The size of assets on which the trading record was based is important as well.
We also focus on fees as they have a significant effect on long-term returns, and screen for funds with lower turnover and expense ratios. The average unit trust has a high rate of portfolio turnover, and while this may not be disclosed as a specific cost of owning a fund, investors pay for it in the form of lower returns. We look for efficient trading and implementation, as this affects trading costs.
If the fund passes our quantitative screens, we will look to better understand the fund’s investment process, team structure, portfolio management and risk control policies. Some of the factors we look at include how the fund breaks down its investment process, the background and experience of the investment team, and the fund’s risk management strategy.