SD-03.2 — Manager Research & Selection
Business Domain: BD-03 Manager & Fund Investment (Front office) · Applies: BOTH
Purpose
Evaluates external managers on strategy, team and track record, and recommends a selection. Manager Research & Selection is the analytical core of BD-03: it takes a candidate from the pipeline and forms a justified view of whether the manager has skill worth allocating to. It is the manager-level counterpart of security research — quantitative track-record analysis and qualitative assessment of process and team — and it ends at a selection recommendation that the investment committee ratifies.
Service Operations
- Define the peer group and classify style — place the manager in a comparable peer group and classify its strategy and style.
- Analyse the track record — returns-based and holdings-based style analysis, performance attribution, capture ratios and drawdown analysis.
- Assess the investment process — evaluate the manager’s philosophy, decision-making process, portfolio-construction methodology and team.
- Conduct manager interviews and reference checks — direct engagement with the team and reference calls with other allocators and portfolio companies.
- Produce the selection recommendation — the rated recommendation and manager rating, weighing the Type I error (selecting a future underperformer) against the Type II error (passing on a future outperformer).
Inputs and outputs
- Inputs: the manager pipeline (SD-03.1); manager track records and holdings; the operational due-diligence opinion (SD-03.3); for a fund commitment, the investment due-diligence report (SD-03.4).
- Outputs: a manager rating and a selection recommendation — consumed by SD-03.5 Fund Commitment & Subscription or SD-03.7 Manager Mandate Administration (the two execution paths) and ratified by the investment committee (SD-16.1).
Entities
- Consumes: Legal Entity (E-01, the manager / GP), Fund & Vehicle (PM-01); the SD-03.1 manager pipeline; the SD-03.3 operational due-diligence opinion; the SD-03.4 investment due-diligence report.
- Owns: none — the manager rating and selection recommendation are analytical artefacts.
Standards
- The CFA Institute Investment Manager Selection framework — universe definition, quantitative analysis (returns-based and holdings-based style analysis), qualitative analysis, and the Type I / Type II error discipline.
Open extensions
- A diligence / DDQ record entity, shared with SD-03.3 and SD-03.4.
- The boundary with SD-03.4 — SD-03.2 produces the selection recommendation; SD-03.4 is the deep, fund-specific investment due diligence behind a fund commitment.