Downloads

 

Previous page  3 of 3

Management and administration selection criteria
    Man Investments assesses and selects external/third party fund managers using the following criteria:
  • Reputation and expertise – The primary criterion used is potential fund managers’ and associated organisations’ reputation for personal and professional integrity. Man Group seeks to ensure that key individuals have verifiable backgrounds and suitable experience in managing funds
  • Investment strategies and processes – fund managers need to demonstrate a rigorous/structured investment process, with credible ideas and well-researched/ proven strategies. Man Group targets fund managers whose strategies offer sustainable competitive advantage and complement those of existing associated and external managers
    • Organisation, governance and compliance culture – fund managers must demonstrate appropriate and relevant standards regarding:
    • Clear ownership and governance structure
    • An organisational structure with defined separation of duties and a well- managed back office
    • A strong compliance culture, with clear evidence that all regulatory registrations are in order
    • Satisfactory performance and management as evidenced in appropriately audited financial statements and accompanying notes
  • Risk management, monitoring and control – fund managers must evidence adequate risk management architecture and/or systems, along with thorough monitoring and control processes, supported by a clear separation of duties and reporting lines between ‘front office’ (i.e., investment-related) functions and ‘back/middle’ office monitoring and control functions
  • Systems and business continuity – fund managers must evidence robust systems, reliable service providers and credible business continuity/disaster recovery plans
  • Corporate responsibility – fund managers must evidence commitment to appropriate standards of corporate responsibility in their own organisations
  • Reporting – fund managers must evidence customer and management reporting standards on a par with Man Investments’ own
Investment strategy, process and performance
    Investment strategy, process and performance are critical factors in Man Investments’ selection of external fund managers. The selection criteria include:
  • Investment strategy – Man Investments must see a coherent investment strategy and a clear track record of performance. Managers are also judged on the quality of their market assessment, including current conditions and any risks to and opportunities for their strategy. Man seeks strategies which clearly identify the source of returns, with the potential to offer positive returns in differing economic environments
  • Performance measurement – performance is measured in terms of volatility, risk adjusted return (Sharpe ratio) and correlations. Particular attention is given to correlation with existing Man programmes when considering new allocations to funds-of-funds
  • Fund capacity and subscription/redemption history – prospective managers are asked to disclose details of fund capacity, likely closing size, redemption experience and recent subscriptions. Consideration is also given to the investor base of open funds, including concentration and any significant recent changes
  • Execution and settlement processes – managers are also assessed on their trading and execution, clearing and settlement processes, and on their policies regarding selection of custodians/ depositories and other third parties (i.e., whether or not fund assets are entrusted to financially stable organisations)

Risk management and controls
Evidence of well-defined and effective risk management and controls is an absolutely essential selection criterion. Policies, procedures and systems must be in place to assess, mitigate, manage and measure risks.

Market/financial risk
    Indicators of market/financial risks examined include:
  • Current and historical portfolio leverage
  • Free capital as a percentage of total fund assets
  • How free capital is invested
  • Position concentration
  • Number of people dedicated to risk management/control

Man also assesses how the manager communicates the nature and level of inherent market/financial risk to investors.

Operational risk
Including the assessment not only of the level of operational risk (in relation to, e.g., quality of staff, systems, monitoring and control processes) but also systems in place to manage it.

Other risks
Ideally, the external fund manager’s own risk assessment protocols will also cover social, ethical and environmental risks, in addition to financial and operational ones.