Investment Research Philosophy & Methodology
Our proprietary investment research process has been refined over decades, is rooted in a sound philosophy and rigorous due diligent efforts that produce consistent manager selection results. Beacon Pointe investment solutions are customized to each client and include active, passive, alternative and socially responsible strategies on an open architecture platform.
Core Investing Tenets
Customize solutions to assist clients with meeting their objects in accordance to their specific risk and return profiles.
Optimally diversify portfolios across asset classes and investment styles, and formulate strategic asset allocation targets.
Entrust high-caliber managers characterized by strong research cultures and fundamentally-driven investment styles.
When evaluating active managers, the Beacon Pointe Investment Research Department looks for the following preferred manager traits:
- High active share
- Intrinsic value, margin of safety driven,
- Asset managers, not asset gatherers
- Invested alongside clients
- No outside influencers or stakeholders
- Not often found on large bank platforms
The third-party asset managers Beacon Pointe recommends to clients invest for stability and growth, yet are nimble enough to take actions that help achieve clients goals. They move beyond the constraints of index composition and rigid style characteristics to focus instead on finding what they believe are the best investments for their clients. As a result, the managers Beacon Pointe utilizes strive to protect capital when markets decline.
Manager Evaluation and Due Diligence
There are six distinct stages to the Beacon Pointe process for selecting active investment managers:
The universe of potential managers and investment strategies includes approximately 30,000 options. Technology allows for narrowing of the list quickly and efficiently to recommend managers that are most likely to generate superior risk-adjusted returns for our clients over a full market cycle.
In evaluating a manger’s track record, Beacon Pointe focuses on measures of risk (down capture ratio, downside risk, largest drawdown, volatility, and beta), risk-adjusted returns (Sharpe ratio and information ratio), and consistency (rolling 5-year relative to peers based on several different metrics).
Beacon Pointe strongly emphasizes the evaluation of qualitative components of an investment manager, assessing the key investment professionals and portfolio managers of each firm, as well as the manager’s structure, philosophy, and process.
Onsite due diligence meetings are arranged; Beacon Pointe visits every investment manager that is recommended to clients. At this meeting, qualitative factors and any concerns that may have been formulated through initial analyses and observation are addressed.
Beacon Pointe dives deeper into the management firm’s resources including research, information technology, operations, compliance, trading and client service. The research findings and insights are summarized into a Manager Scorecard and the Final Score is determined, which is a combination of quantitative factors (25%) and qualitative factors (75%).
The Beacon Pointe Investment Committee invites key decision-makers of the subject firm to present to the entire Beacon Pointe investment team. If the manager is approved by super majority vote, it is added to Beacon Pointe’s proprietary Focus List of approved investment managers. The manager is closely monitored on a routine, on-going basis.
May 2022 With the stock market close to entering an official bear market (defined as a decline of 20% from…
Authored by : Michael G. Dow, CAIA, CFA, CPA, Chief Investment Officer Julien R. Frazzo, Director of Risk Management and…