Speaker 1: Welcome to Inside Active, a podcast about active managers that
Speaker 1: goes beyond sound bites and headlines and looks deeper into
Speaker 1: their processes, challenges, and philosophies and security selection. I'm David Cohne,
Speaker 1: I lead mutual fund and active Research at Bloomberg Intelligence.
Speaker 1: Manager selection has become significantly more complex over the past decade.
Speaker 1: Investors today have access to more strategies, more data, and
Speaker 1: more managers than ever before. But without abundance comes a
Speaker 1: different challenge. Distinguishing between performance driven by skill, process and
Speaker 1: durability versus outcome shape by market environments factor exposure are
Speaker 1: simply good timing today, I wanted to explore what separates
Speaker 1: truly durable investment managers from those that may only look
Speaker 1: compelling for a moment in time, and how experience allocators
Speaker 1: approach that challenge. Joining me to discuss that is paulk
Speaker 1: Senior Vice president and Chief Investment Officer of American Beacon Advisors. Paul,
Speaker 1: thank you for joining me.
Speaker 2: Hey, great to be here, David, thanks for having me.
Speaker 1: So let's start at the beginning. When you're you know,
Speaker 1: when you begin researching a new manager, what are the
Speaker 1: you know, first three things you look at before even
Speaker 1: considering performance.
Speaker 2: Yeah, well hey, maybe just just quickly before getting into
Speaker 2: kind of a response there might it may be helpful
Speaker 2: to frame how American Beacon approaches manager selection as a firm. Sure,
Speaker 2: you know, we were built around an open architecture model
Speaker 2: with really like a long term partnership mindset. So what
Speaker 2: our what our CEO Greg Greg Stumm would say was,
Speaker 2: you know, we don't we don't date, we get married.
Speaker 2: And so from the beginning we focus on, you know,
Speaker 2: finding differentiated external managers that are that are very active,
Speaker 2: you know, doing the work to understand whether their edge
Speaker 2: is is real and durable like a consistent performer, and
Speaker 2: then building you know, lasting relationships around you know, the
Speaker 2: strongest opportunities for investors. So that's kind of philosophy. You know,
Speaker 2: rigorous selection, you know, thoughtful product structuring and and really
Speaker 2: a long term view are the backdrop for how we
Speaker 2: think about, you know, evaluating managers today. But yeah, and
Speaker 2: you know, look, so as you said, like performance, performance
Speaker 2: is important, but the first things we really look at
Speaker 2: our philosophy process and people you know behind it, and
Speaker 2: and you know, we want to make sure you know,
Speaker 2: the team has the experienced resources you know, discipline necessary
Speaker 2: to execute on their on their process consistently. You know,
Speaker 2: we also look at things like capacity, portfolio construction, whether
Speaker 2: it's a good fit and role to play for the
Speaker 2: broader product structure. And in our platform, certainly performance matters,
Speaker 2: but we think it it really comes down to the
Speaker 2: first things. We look at our philosophy process and the team.
Speaker 1: How much of managed selection is quantitative versus qualitative today?
Speaker 1: And you think it's kind of shifted it all over
Speaker 1: the last decade.
Speaker 2: So look, I think I think there's great managers, you know,
Speaker 2: in in in both camps. I do think with with
Speaker 2: AI lately, David, right, You're you're seeing more more data
Speaker 2: and more kind of quant information. Quantitative is taken into
Speaker 2: really like the front end of aspects of investing, and
Speaker 2: you know some some call it kind of I kind
Speaker 2: of don't like this term, but you know, quantumnal, so
Speaker 2: you have quantitative combined with with fundamental. I think how
Speaker 2: we look at it, maybe peeling that back a little bit,
Speaker 2: is we really see you know, quantitative and qualitative outputs
Speaker 2: as compliment mentory rather than competing. So we do think,
Speaker 2: you know, quantitative work when we're looking at assessing kind
Speaker 2: of a manager and underwriting them. We certainly look at
Speaker 2: quantitative factors like performance, risk, you know, attribution, consistency, whether
Speaker 2: you know results line up with the manager's stated approach.
Speaker 2: And from a qualitative side, it's just as important because
Speaker 2: you know, numbers, you know, can't tell you how decisions
Speaker 2: are actually being made. So how does the team function?
Speaker 2: Does the process hold up into certain environments you know,
Speaker 2: why or why not? So we we do think, you know,
Speaker 2: there's a there's a combination of both quantitative and qualitative
Speaker 2: too to really factor in when when looking at a
Speaker 2: manager holistically.
Speaker 1: So you know, you had touched upon a little bit,
Speaker 1: you know, focusing on the process over the outcome first,
Speaker 1: that's what you're looking at, you know, in practice, how
Speaker 1: do you distinguish between you know, a repeatable process and
Speaker 1: someone who just might have had a great cycle.
Speaker 2: Sure, I think I think it really does come down
Speaker 2: to whether you know there's that consistency there in the
Speaker 2: outcome that you can trace back to kind of clear
Speaker 2: discipline process, discipline process, does it follow their philosophy or
Speaker 2: was it really helped by just some you know, macro
Speaker 2: environment backdrop, right that happened to be favorable so we
Speaker 2: do really try to look for evidence that the manager
Speaker 2: can explain what drove results, you know, how those decisions
Speaker 2: connect to their stated philosophy and process. And you know,
Speaker 2: I would say though that we are also looking at
Speaker 2: kind of factor analysis, right, so we use fact set
Speaker 2: to kind of look at it. So before we even
Speaker 2: go in and talk to them, we're kind of seeing, hey,
Speaker 2: what were those factors, like, how is their portfolio construction constructed,
Speaker 2: and what kind of benefit that that had. So we
Speaker 2: go in there with kind of you know, that lens
Speaker 2: to begin with, so then we can have more pointed
Speaker 2: questions and kind of really see how they how they
Speaker 2: respond to that.
Speaker 1: So is that how you can kind of tell, you know,
Speaker 1: whether the performance came from skill or just being positioned correctly.
Speaker 2: We think that's we think that is really helpful. Yeah,
Speaker 2: so we we do try to separate it. You know,
Speaker 2: sometimes it's hard depending on the depending on the environment.
Speaker 2: But you know, a strong market, a style tailwind, broad
Speaker 2: factor exposure can can make a lot of managers look
Speaker 2: good for a period of time. So so we do
Speaker 2: spend you know a lot of time on that attribution again, construction,
Speaker 2: consistency of the decision making you know, of course we
Speaker 2: want to see that those excess returns are in fact
Speaker 2: coming from kind of bottom up stock selection. If that's
Speaker 2: what they claim to be their edge, right, if that's
Speaker 2: supposed to be three quarters of their performance over rolling
Speaker 2: market cycles, then we certainly want to make sure we're
Speaker 2: we're seeing that because, as you know, then if if
Speaker 2: stock selection is bad, you know, that's gonna that's gonna
Speaker 2: hurt them then and in those cases where they're not
Speaker 2: making good picks or or the market moves against them.
Speaker 2: But yes, that repeatable, That repeatability and that consistency you know,
Speaker 2: is really something that that we key in with with
Speaker 2: every one of our our partner sub advisors.
Speaker 1: So how I guess how long of a timeframe? Because
Speaker 1: one of the things I think of is, you know,
Speaker 1: some managers might have an edge, but you know, could
Speaker 1: it be arbitraged away you know, when other folks are
Speaker 1: kind of following that. You know, how do you kind
Speaker 1: of evaluate that?
Speaker 2: Yeah, so we do tend to look at you know,
Speaker 2: kind of rolling three in in five year periods. But
Speaker 2: we think, you know, the durability of a manager is
Speaker 2: really rooted in something structural or hard hard to replicate.
Speaker 2: You know, so what are they doing differently than others
Speaker 2: that can help them be you know, consistent over time.
Speaker 2: It could be, you know, it could be a differentiated
Speaker 2: research process. It could be you know, hey, they're just
Speaker 2: really deep in expertise in the in the areas that
Speaker 2: they play in. They might have a strong network that
Speaker 2: that helps them get some insight. You know. The team
Speaker 2: culture is also something we we look at, you know,
Speaker 2: and do they have scale and flexibility? So if if
Speaker 2: the edge does depend on something that can be easily
Speaker 2: you know, copied or screened for, you know, we we
Speaker 2: want to understand that and take that, take that seriously.
Speaker 2: But you know, if it comes down to like their
Speaker 2: overall judgment experience and a process that that's been refined
Speaker 2: over time, you know that that tends to be more durable.
Speaker 2: Doesn't mean that it's you know, week in or week
Speaker 2: out or month in or month out that they're going
Speaker 2: to outperform. But that's what we try to review and
Speaker 2: and look we're we're reviewing these things on a on
Speaker 2: a quarterly basis with all of our underlying managers. So yes,
Speaker 2: we do a lot of due diligence on the front
Speaker 2: end to onboard you know, a subadvisor partner. But it
Speaker 2: it really comes down to that ongoing relationship and that
Speaker 2: ongoing re underwriting of the managers that we think differentiates
Speaker 2: what we do and helps us have a better understanding
Speaker 2: and our view of how that manager should react in
Speaker 2: certain market environments or not.
Speaker 1: So when you're meeting with managers, you know, what are
Speaker 1: the types of questions you ask them or you think
Speaker 1: that you know, they tend to reveal most about how
Speaker 1: they really think.
Speaker 2: Yeah, look, you know, the best questions are usually the
Speaker 2: ones that force the manager to move beyond you know,
Speaker 2: their their polished narrative and explain what actually how they
Speaker 2: actually make decisions. And we've all been part of those
Speaker 2: meetings where you get some kind of slick, very smart
Speaker 2: and also very talented at presenting and you're kind of like, wow,
Speaker 2: that's that's fantastic, But you really have to look, you know,
Speaker 2: beneath that that veneer. I think one of the best
Speaker 2: things is like, hey, talk to us about your highest
Speaker 2: conviction ideas, what mistakes have you made, what are they
Speaker 2: debating like internally right now, and what would cause them
Speaker 2: to change their mind in a position. So you learn
Speaker 2: a lot when you're when you walk through a decision
Speaker 2: from beginning to end and what they saw, what they waited,
Speaker 2: what risk were considered. You know, did they ever think
Speaker 2: about doing something and they didn't, why not? And I
Speaker 2: think that's where you get a lot of good information
Speaker 2: from that. I also think being able to talk to
Speaker 2: different team members, not just kind of the polished you
Speaker 2: know client PM or or you know, the real good
Speaker 2: marketer and sometimes even the lead pms are are very
Speaker 2: good at sometimes they're just they're really smart, but not
Speaker 2: the best at giving the message. But some are very good.
Speaker 2: And then you have the polished marketing person. We like
Speaker 2: to talk to the lieutenant, the junior PM, the analyst,
Speaker 2: And what we really like to do, David, is if
Speaker 2: we can let's get some of those you know, more
Speaker 2: junior folks like an analyst or senior analyst alone and
Speaker 2: talk to them. So to us, that can be extremely
Speaker 2: beneficial because as you might be surprised what they share
Speaker 2: or sometimes when you're like the executive on the thing
Speaker 2: and you say, well, here's how we do it, and
Speaker 2: then you talk to the people that are kind of
Speaker 2: really doing the analysis and a lot of the quantitative
Speaker 2: stuff on the front end and everything you can learn,
Speaker 2: you can learn some interesting things.
Speaker 1: So if we talk about what you're looking for it,
Speaker 1: do you think is any part of the process that's overrated?
Speaker 1: You know, is it just kind of people focusing on
Speaker 1: performance alone or.
Speaker 2: Yeah, Look, I would say I'll go back to one
Speaker 2: of the things I just mentioned, Like, I think some people,
Speaker 2: you know, it's overrated if you're just doing due diligence
Speaker 2: and you're just talking to those polished people and the
Speaker 2: polish presentation. So and I also think the other aspect
Speaker 2: of that is short term performance. I think, Look, we're
Speaker 2: all human, and I do think like retail folks in general,
Speaker 2: I know you know this, David, but like they'll tend
Speaker 2: to chase performance, right, and that's probably not what you
Speaker 2: want to do. I think. I think both of those
Speaker 2: things can be useful, but neither tells us enough on
Speaker 2: their own. And so, you know, kind of a great
Speaker 2: presentation to make a process sound more differentiated than it
Speaker 2: really is, or a recent short term track record might
Speaker 2: not reflect, you know, kind of the true skill. So
Speaker 2: in our experience, it's it's it's better to look kind
Speaker 2: of under that surface. Again, rolling three and five year periods,
Speaker 2: you know, in and through and out of market cycles
Speaker 2: is what we want to see. And we also want
Speaker 2: to see obviously risk adjusted performance, not just top line performance,
Speaker 2: like how much risk are they taking to get that?
Speaker 2: And yeah, I think I think that's really you know,
Speaker 2: and tell us those three to five year periods are
Speaker 2: really what folks should be looking at. And you could
Speaker 2: you could say, hey, a market cycle, now, Paul has
Speaker 2: been a lot longer, you know, with kind of financial
Speaker 2: and monetary policies and everything like that. But in general,
Speaker 2: if you get beyond three and five, people are going
Speaker 2: to say, well, why would I look at ten? So
Speaker 2: that's why we tend to focus in on three and
Speaker 2: five and we do think that can give you Again,
Speaker 2: rolling cycles of three and five can be we think
Speaker 2: can be very meaningful.
Speaker 1: What about red flags? I mean, you know, you mentioned risk.
Speaker 1: Are there other kind of red flags that would kind
Speaker 1: of immediately move a manager that's you know, probably not
Speaker 1: the best fit for you.
Speaker 2: Yeah, I think there's a number of them. I think it.
Speaker 2: You know, for us, the biggest ones come back to inconsistency,
Speaker 2: you know, lack of transparency or communication or a process
Speaker 2: that just doesn't match up with the outcomes. That we
Speaker 2: would think you would get from that market. So we
Speaker 2: had as an example, a value manager. Now we do
Speaker 2: kind of like different flavors of value within our multi
Speaker 2: managed value products, and so we have kind of a deep,
Speaker 2: a core, and a relative and that relative value manager,
Speaker 2: David was becoming a lot more growth leaning, and this
Speaker 2: was at a time when it was beneficial from a
Speaker 2: performance standpoint, and so I think when you when you
Speaker 2: see that, you know, there's there's a lot of questions
Speaker 2: we had, and we did move on from that manager
Speaker 2: even though they were they did lights out, but they
Speaker 2: weren't sticking to the discipline in the space that we
Speaker 2: needed them to be in. And so it was the
Speaker 2: right decision for us because when we offer something to
Speaker 2: to a client, to an investor, we wanted to stay true. Right.
Speaker 2: So I guess if they if they can't clearly explain
Speaker 2: how decisions are made, if the team appears unstable, if
Speaker 2: risk controls are our secondary, and if the story you know,
Speaker 2: continues to change on how they're doing things, that's you know,
Speaker 2: obviously that's a problem that's going those are going to
Speaker 2: be red flags.
Speaker 1: So I could have a follow up to that, you know,
Speaker 1: just talking about actually value kind of brought up a
Speaker 1: good point. And you know, there were a lot of
Speaker 1: I think value managers that were picking up I guess
Speaker 1: discounted tech stocks after you know, the bear market, and
Speaker 1: then you know, if they're holding it too long once
Speaker 1: they become growth stocks. Is that kind of something you'd
Speaker 1: be looking at?
Speaker 2: We would, we would, And you know, look, you know
Speaker 2: how these these indices are are created, and you guys
Speaker 2: have some good ones, but maybe some other firms don't have.
Speaker 2: You know, it's kind of like how it's divided up.
Speaker 2: You have really big, large megacap kind of growth names
Speaker 2: that are in the large cap value index. So it
Speaker 2: does become hard. So look if our if our deep
Speaker 2: value guys are looking at that in that same kind
Speaker 2: of multi managed portfolio structure that I alluded to earlier,
Speaker 2: that that could be a problem. It's that if it's
Speaker 2: the relative value manager and then they are trimming it
Speaker 2: when it once it does get you know that that
Speaker 2: maybe makes some sense. But certainly, like in the large
Speaker 2: cap space right, it's been it's been tough to be
Speaker 2: an active manager with with the whole AI, you know,
Speaker 2: and the mag seven and all that going on, and
Speaker 2: I suspect that's still going to be somewhat of a
Speaker 2: of a talking point right here here going for but yeah,
Speaker 2: you do, you do see that.
Speaker 1: So that kind of brings up to another question of
Speaker 1: you know, we kind of talk about when you're kind
Speaker 1: of your meeting managers and kind of doing your due diligence,
Speaker 1: what does the ongoing due diligence look like an American beacon,
Speaker 1: you know, while you're kind of continuing to monitor them.
Speaker 2: Yeah, so as I, as I mentioned a little bit
Speaker 2: earlier that you know, we do think this is a
Speaker 2: differentiator for us and for our firm, We don't. We
Speaker 2: don't believe a lot of other folks are kind of
Speaker 2: re underwriting you know, their subadvisor partners on a on
Speaker 2: a quarterly basis. So we do that quarter in and
Speaker 2: quarter out, and it does take a lot of time. Again,
Speaker 2: doesn't mean we're going to be perfect in finding you know,
Speaker 2: pivots or issues, but I think it provides definitely a
Speaker 2: better lens. So we're just not peripherally looking at, oh,
Speaker 2: this was their performance, you know, for the period, we're
Speaker 2: really looking at again that people process. You know, is
Speaker 2: there any changes to the FLAWPIA is the culture still
Speaker 2: you know, intact from what we can see, and again
Speaker 2: that that helps in talking to different levels of folks
Speaker 2: on the team. You know, are there organizational changes outside
Speaker 2: of the investment team that we should be concerned about?
Speaker 2: What about from an operational perspective, So we we try
Speaker 2: to be as fully encompassing as we can. And again
Speaker 2: we we think that, you know, it's very helpful then,
Speaker 2: like even capacity, So we look at capacity all the time,
Speaker 2: particularly in those areas that you would expect that are
Speaker 2: more capacity constrained. But we're constantly talking to them about
Speaker 2: even those aspects to say, hey, if we can sell
Speaker 2: a half a billion dollar more in a small are
Speaker 2: we okay, Like is that good? Is this amount that
Speaker 2: you gave us before still accurate? Or can we get
Speaker 2: more at that same price point? So all of those
Speaker 2: things are coming up, and you know, we do think
Speaker 2: it's it's been helpful for us to identify some some
Speaker 2: problems in.
Speaker 1: The past, so you know, what would actually cause you
Speaker 1: to lose conviction and a manager?
Speaker 2: Yeah, so yeah, we I think when something changes and
Speaker 2: we can no longer kind of explain that the strategy
Speaker 2: with the same clarity we we once could, so that
Speaker 2: might be a shift in in people, a drift in process,
Speaker 2: unexpected risk taking, inconsistency between you know, what is said
Speaker 2: and what is done, or results that no longer line
Speaker 2: up with the state of philosophy. Like you know, hey,
Speaker 2: you're a relative value manager and all of a sudden
Speaker 2: they're kind of like a heavy growth manager. So from
Speaker 2: a style perspective, under performance by itself, I guess i'd
Speaker 2: say is not usually enough, because good managers will go
Speaker 2: through difficult periods. But the bigger issue is when the
Speaker 2: reasons we believed in the manager to begin you know
Speaker 2: with to begin with, start to eroad and we no
Speaker 2: longer fell you know, the process is as coherent or
Speaker 2: repeatable or trustworthy as it needs to be. Is when
Speaker 2: when we lose conviction.
Speaker 1: So, I mean, you know, my focus is active, and
Speaker 1: you know, well, I think you know the general thing
Speaker 1: is when people think of active is they tend to
Speaker 1: do or they tend to really show their merit during
Speaker 1: down periods. And so, yeah, what do you think separates
Speaker 1: managers who do do well or survive difficult periods? You know,
Speaker 1: what separates them from the ones that kind of unravel
Speaker 1: when the market turns against them?
Speaker 2: Yeah, So I do think the managers that navigate you know,
Speaker 2: tough periods best are usually the ones with the process
Speaker 2: they really understand and believe in. Right, they combine with
Speaker 2: the discipline importantly to stay thoughtful under pressure. So they
Speaker 2: tend to know, you know, kind of like what they know,
Speaker 2: why they know it, and what what kinds of environment
Speaker 2: should or should not favor them. You know, they're not improvising,
Speaker 2: you know, in difficult markets. They they really stay true
Speaker 2: to what is it we do and have to believe
Speaker 2: the fact that, hey, when quality as you know David
Speaker 2: as a factor. Last year was one of the worst
Speaker 2: periods to have quality as as a key discipline. Uh,
Speaker 2: in the last one decade and a half or so,
Speaker 2: we have some managers that absolutely are have outperformed like
Speaker 2: last year and are continuing to struggle a bit, but
Speaker 2: they're staying true to what they do and that's and
Speaker 2: that's actually very meaningful. If we saw them veer off
Speaker 2: that course, we would have concerns. And by the way,
Speaker 2: now if quality comes back and they're not participating, we're
Speaker 2: gonna have some other you know, challenging discussions. But somebody
Speaker 2: that really knows who they are and stays true to it.
Speaker 2: That that's you know, that's what we think separates uh,
Speaker 2: you know, the good managers.
Speaker 1: Okay, I also want to ask you about concentration because
Speaker 1: we all know, you know, what's happening with you know,
Speaker 1: the large and megacap companies, you know, making up such
Speaker 1: a huge part of some of the large indexes. If
Speaker 1: we're talking about concentrate risk, are you being more cautious
Speaker 1: about highly concentrated managers or you do or do you
Speaker 1: kind of view it more as evidence of conviction?
Speaker 2: Yeah, look, I think I think the latter. Yeah, So
Speaker 2: we really we do have you know, we have a
Speaker 2: lot of different you know products on our platform right
Speaker 2: that that very greatly but those that have high conviction,
Speaker 2: I mean, we like that. So we are an active shop,
Speaker 2: right and so the title of what you want to
Speaker 2: talk about is just write up our power alley. We
Speaker 2: we strongly believe in it, and so we do have
Speaker 2: a lot of managers that are very concentrated and have
Speaker 2: great conviction around that. And there's there's certainly risk aspects
Speaker 2: to that that you have to make sure you're you're
Speaker 2: discipline from the perspective as well, But we think that
Speaker 2: that can you know, that can be a great a
Speaker 2: great philosophy and strategy to have have certainly in definitely
Speaker 2: some some you know, specific asset classes, right, and so
Speaker 2: we we value that we you know, we try to
Speaker 2: find managers that have high conviction. And some would say, hey,
Speaker 2: conviction is if you have you know, in a large
Speaker 2: cap you know, forty to sixty names or even maybe
Speaker 2: a little bit more than that. And then we have
Speaker 2: some that are you know, in small cap or or
Speaker 2: high yield or or in large cap growth that are
Speaker 2: you know, twenty five to thirty five names. So it's
Speaker 2: it's all in how we gain comfort in each of
Speaker 2: those managers in those spaces that they play in and
Speaker 2: results speak for themselves. And sometimes in a multimanaged type
Speaker 2: of type of products that that we have, we have
Speaker 2: one of those managers that is very opportunistic, very concentrated. Look,
Speaker 2: they can they can ebb and flow. They're a lot
Speaker 2: more volatile than the other managers, but in that context
Speaker 2: of a multi managed product, it works extremely well.
Speaker 1: Okay, And there's another topic I want to ask you about.
Speaker 1: It's also kind of top of mind in the fun
Speaker 1: world is private markets. And so I was just curious
Speaker 1: how much of your manager research today kind of extends
Speaker 1: into private markets versus you know, typical public strategies.
Speaker 2: Yeah. Yeah, so we do have a fair amount you know,
Speaker 2: for sure in private markets that we do from a
Speaker 2: diligence standpoint. We are also so our team, my team
Speaker 2: acs as an outsourced CIO as well, and so we've
Speaker 2: been doing private markets since the late eighties and and
Speaker 2: thankfully very successfully. So so we have that backdrop that
Speaker 2: maybe not a lot of people, that a lot a
Speaker 2: lot of people know about. And so yeah, as there's more,
Speaker 2: you know, kind of the democratization of of of private markets,
Speaker 2: we are looking at that and how we can be
Speaker 2: helpful and really call on our our expertise of multimanager
Speaker 2: differentiated active you know kind of types of portfolios that
Speaker 2: we can construct and really call on. That's a you know,
Speaker 2: we believe offer products that are going to be useful
Speaker 2: in specifically like the wealth in retail channels. So yes,
Speaker 2: we we're doing a lot in that space and you know,
Speaker 2: you might see more to come here in the not
Speaker 2: so distant future.
Speaker 1: So when you're doing that, though, is does your evaluation
Speaker 1: process change between the two.
Speaker 2: Yeah? No, thanks, thanks, Look, I think there's some aspects
Speaker 2: of it that are different, right, just from the different
Speaker 2: structures and from liquidity management and all that. So that
Speaker 2: is absolutely you have to dive into that more and
Speaker 2: make sure you have the right structure and the right
Speaker 2: product for the right type of client. And we've seen
Speaker 2: some of those issues kind of happening here where you
Speaker 2: want to have full transparency there. But from the standpoint
Speaker 2: of evaluating, you know, again kind of people, process, philosophy
Speaker 2: and all that, a lot of that can be the same, right,
Speaker 2: But again you do spend typically a little bit more
Speaker 2: time on sourcing. What's their underwriting discipline, how is the
Speaker 2: portfolio constructed, what is the governance structure, how the firm
Speaker 2: behaves across longer you know, time horizons, right, and less
Speaker 2: pricing points, less frequent pricing points. You have to understand
Speaker 2: that and appreciate that. And then from an operational standpoint,
Speaker 2: just to bring that side. And even though I'm the CEO,
Speaker 2: I'm not the operations guy, but you better have good
Speaker 2: operations folks that understand everything ties together, the right trustee,
Speaker 2: you know, custodian and really can you value these things
Speaker 2: properly and accurately, and how do you how are you,
Speaker 2: you know, communicating that in a in a relevant and
Speaker 2: transparent manner.
Speaker 1: Okay, I just have one more question before we go.
Speaker 1: You know, with your experience, uh, with you know, with
Speaker 1: manager research and oversight, what lesson do you believe most
Speaker 1: allocators learn too late?
Speaker 2: Yeah, that's a great question. I mean, I think what
Speaker 2: many allocators might learn too late is that manager selection
Speaker 2: is not just about picking a good manager. It's picking
Speaker 2: the right manager for the job. Right. So a strong
Speaker 2: track record might be attractive, but if you misunderstand the
Speaker 2: role that they play, or the risk profile, or how
Speaker 2: that strategy behaves in difficult markets, it can still maybe
Speaker 2: not be a great decision. Right. So that's where I
Speaker 2: think those multi managed value funds that I've been kind
Speaker 2: of mentioning a couple of times here, I think that
Speaker 2: makes a lot of sense. So those those in essence,
Speaker 2: again we have relative, we have deep, we have and
Speaker 2: then kind of core traditional, and then in small cap
Speaker 2: we have kind of an opportunistic manager that can go
Speaker 2: wherever the deals are, and that's that highly concentrated manager.
Speaker 2: So I think you have to understand what role are
Speaker 2: you looking specifically for that manager you know, to play
Speaker 2: and and that's that's, that's you know, of paramount importance.
Speaker 1: Okay, well, thank you. Unfortunately we need to end here,
Speaker 1: but this is a lot of fun, Paul. I really
Speaker 1: appreciate you joining me today.
Speaker 2: Now, well, thanks a lot, Thanks a lot, David.
Speaker 1: I also want to thank our listeners. If you like
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Speaker 1: And if you'd like to see more of our research
Speaker 1: on the terminal, go to b I Fund, Go for
Speaker 1: Fund and Active Research until our next episode. This is
Speaker 1: David Cohne with Inside Active