Friday, November 9, 2007

Performance or process?

Fundfire reports on a study, run by Greenwich Associates, that finds that finds that while "quantitative information like performance and risk management are still important, the qualitative factors are far more compelling in the due diligence process".

Fascinating for an industry where the results are so measurable and it's the amount of money you produce, and so make, that counts.

“We asked the portfolio managers what they perceive to be important in the process of evaluating them,” says Greenwich consultant Andrew Klebanow. “The managers…have their own point of view about what they believe manager research teams should focus on to effectively evaluate them as asset managers.”

The main finding: the qualitative factors – a firm’s investment philosophy, its trading practices, its ownership structure, its people – are more important than performance, risk and other quantitative factors. The study found 75% of managers feel the qualitative factors are “extremely important” in the evaluation process. Quantitative factors were called “extremely important’ by 51% of respondents, indicating that performance is not the most important.

When we discuss FirstRain with potential customers we discuss it in the context of their research process. The old salts, and the young turks, who produce consistently high results have a rigorous research process where a rich variety of sources of information is essential and they cannot tolerate missing insight on their markets and companies. As a result a service which discovers information and then detects patterns in the information significantly enhances their process.

"“At the end of the day, performance is the end result of the processes,” Klebanow says."

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