The task of identifying investment managers likely to produce market leading investment returns on a prospective basis is an exceedingly difficult undertaking requiring a rigorous combination of quantitative and qualitative evaluation. However, the typical industry practice of assessing investment managers by utilizing historical returns or style box adherence as the principal forms of analysis is quite likely to result in imprecise if not materially erroneous conclusions. To further complicate the matter, most investment manager “research” is performed by relatively junior personnel who very often have never had any actual portfolio management experience. Given these circumstances, it should not be considered a surprise that the latest academic research definitively shows that far too many investment manager “hiring/firing” decisions are essentially poor decisions, with the fired manager typically outperforming the hired manager by a very considerable margin over the succeeding years. Something is very clearly wrong with the manager search business as it is currently practiced by the investment advisory and consulting industry today.
The HWCP Approach
HWCP believes that superior investment managers distinguish themselves predominantly along the following five factors: philosophy of risk control, process of decision making, cultural orientation, ownership structure & rewards system, and excellence of personnel. These factors are universally qualitative in nature, and require a differentiated and non-traditional thought process in order to properly measure. At the same time, HWCP believes that it is critically important for those purporting to provide manager search capabilities to actually have a history of successfully investing assets across multiple investment styles, strategies, and market cycles. There is simply no substitute for the knowledge, judgement, and healthy regard for risk that can only be acquired after many years of practical investment management experience.
To populate the major asset class exposures derived from the Dynamic Asset Allocation Model described elsewhere, HWCP will utilize the multi-decade, hands-on portfolio management experience of its Founder/Managing Member to identify, compile, and make available to clients a Recommended List of investment managers operating within each asset class that are deemed to be the most attractive and worthy candidates for timely ownership. The HWCP Recommended List of investment managers will consist of managers and/or vehicles across the universe of available investment styles and/or strategies, and will be continually assessed and amended as necessary. All managers on the HWCP Recommended List must have a highly refined and documented approach to the management of risk and must have a demonstrated history of being responsible and ethical stewards of investment capital.
The HWCP Recommended List of investment managers should not be considered merely an “All Star” team of recently top performing managers as other investment consulting services typically provide. The managers on the HWCP Recommended List are selected specifically for their ability to consistently generate attractive levels of risk adjusted investment return through time, regardless of the overall market environment, while at all times protecting against the illogical forced exposure to investment styles and unproductive benchmark hugging that is unfortunately so prevalent across the investment management industry today.
All investment vehicles on the HWCP Recommended List must offer daily pricing, and may employ long only, short only, or long/short investment strategies regardless of asset class or investment style.