Fund Research Methodology

A brief explanation of Zenith’s Fund research process.

Summary

Zenith’s key competitive advantage is that we recommend only the best investment products for our clients. Initially we apply both quantitative and qualitative screens to identify funds worthy of further consideration. Detailed due diligence is undertaken on the resulting short list. This involves a highly comprehensive review process which encompasses an assessment of key criteria including the organisation’s structure, the investment philosophy and process, the calibre of the investment personnel and an in-depth portfolio attribution analysis. The best funds are added to the “Recommended List”, a list of our highest conviction products.

Breadth of Research

Zenith considers all Australian registered managed funds and a limited number of unregistered products. Flagship funds are used as a proxy for the manager’s capabilities in an asset class.

We generate fund data surveys from our extensive database. Data is collected directly from the investment managers. The collection of in-house propriety data is rare within research houses, however Zenith considers this to be an important source of value add. This method has uncovered many opportunities prior to their coverage on commercial databases. In addition, there is a growing band of investment managers who are looking to limit growth in funds under management to remain within their target capacity limits. As a result, they are not represented on commercial databases. The early identification of quality fund managers is one of our key competitive advantages.

Quantitative Screen

From its database, Zenith divides the universe into broad asset class categories, then selects a list of leading contenders who pass proprietary, quantitative performance and risk based screens.

Qualitative Screen

Zenith then makes a qualitative assessment of the quantitative filter output.  For example, the initial quantitative filter may identify a strongly performing manager who subsequently fails the qualitative filter given Zenith’s view on the team, organisation or process. Conversely, the quantitative filter may look less attractive if the current market conditions do not suit the manager’s investment style.

Detailed Due Diligence

After a short list has been constructed, detailed due diligence is undertaken with the investment manager. At this stage we thoroughly examine every aspect of the manager, including: organisation, investment team and process, portfolio management and construction, risk management and the product structure. The face-to-face interview with key personnel from the investment manager is regarded as a critical component of the process. A thorough review of all documentation is also undertaken.

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