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Turn Your Head and Cough: Our Annual Fund Advisor Check Up

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Over the last few months, my portfolio manager team members and I have hit the road, travelling through Canada, the United States and Europe – including Paris, London and Edinburgh – to meet with each of our fund advisors in person.

These visits are like an annual physical: a chance for us to conduct a thorough health check on each of our fund advisors, make a diagnosis and prescribe the right medicine or corrective action, if needed. 

When we choose to work with a particular fund advisor, we are targeting a certain group of securities designed to achieve our return and risk expectations. The selection of the securities must follow a repeatable process grounded in sound philosophy and with experienced people. We use these due diligence meetings to reaffirm our thesis, find out how these three components have changed, and validate our forward-looking return and risk expectations.  

We spend several hours getting deep into the weeds in these meetings. Armed with our analysis, we test decisions against our expectations, challenge the investment rationale and try to understand how our fund advisors are thinking and why.  Digging into the portfolios in detail, we take a close look at buy and sell decisions to see where value has been added, and where it hasn’t. We then tie this back to the asset manager’s stated philosophy and process, ensuring they are likely to stay consistent with our expectations.

It’s an extremely thorough process.  I can only imagine getting a four-hour physical; I am certain there would not be much of me left undiscovered.  In fact, we’ve often been told by our fund advisors that we dig deeper, ask tougher questions and often know their portfolios better than they do.

I am sometimes asked whether the travel and expense are worthwhile when a phone or Skype call might do. But just like you wouldn’t want to assess your patients via conference call, for us, face to face meetings are an essential way for us to get the health check we’re truly looking for. 

It is the subtle clues that tell us so much about the status of an advisor. The body language of those who are not speaking, the flow of the conversation, the look and feel of the office and the tone of the support staff all provide important clues as to how deep we should probe or where to direct the line of questioning.

I can remember a meeting where we spent an extra hour and a half with the head of the organization (he thought he was coming in for 15 minutes) because we were not confident with his answer on recent hires. We ended up replacing them shortly after that meeting.

Being physically present is an opportunity for us to create an environment in which our asset managers feel comfortable, and are able to be open with us. This can either give us the assurance that our philosophies are being adhered to – or give us clues that they aren’t.

In the end, our job is really to make the distinction between ego and skill and find out if an asset manager’s track record is repeatable – or just lucky.

Back to that check-up analogy. Just like it takes effort to maintain a healthy body, maintaining a healthy relationship with our fund advisors also requires regular care. And as we close out 2016, after hours of rigorous check-ups, I can confidently say that our client portfolios are in good health. At MD, we are committed to ensuring your investment portfolios remain healthy and prosperous.


About the Author

CRAIG MADDOCK, CFP, CFA, CIM, MBA, is Vice President, Senior Portfolio Manager and Head of the Multi-Asset Management team at MD Financial Management. He leads the team of portfolio managers and investment analysts responsible for managing the firm’s mutual funds and investment pools.

Profile Photo of Craig Maddock