Investments



Fund Selection Process


PROCESS
We strive to identify managers who employ a disciplined and prudent investment process that has proven to be successful and which they have executed in a consistent fashion. We favor attributes such as insightful security analysis, a robust valuation discipline, and sound risk management and portfolio construction.

PEOPLE
We judge the depth and capabilities of members of the investment team and stability of the organization. We also place considerable emphasis on stewardship by favoring funds where the team has shown the tendency to act in the best interests of shareholders and where the portfolio managers have their incentives aligned with fund shareholders.

PERFORM
We strive to identify funds that have shown the ability to deliver solid risk-adjusted performance over time. We evaluate performance over various time periods. We favor managers who have added value over an appropriate benchmark or peer group in a consistent manner.

CAPACITY
We consider whether the investment strategy that a team runs is constrained by size, and if so, what steps the team has taken to address the issue. All else being equal, funds with small assets bases can be more flexible in their approach, while funds that get too big often have a more difficult time adding value.

EXPENSES
Research indicates that expenses are one of the most important factors in predicting mutual fund performance. While a lower expense ratio is always better, we put expenses into the proper context and consider other factors such as the fund's size and trend in expenses.

Investments

PORTFOLIOS

The investment process at Morningstar Managed Plan Solutions consists of:

  • Setting a strategic asset allocation target that serves as the benchmark for portfolio construction and performance evaluation,
  • Determining how we want the portfolios tactically positioned relative to their benchmarks, Selecting underlying securities,
  • Rebalancing accounts to maintain a certain risk profile, and
  • Making adjustments to the portfolios based on the market climate or for fund-specific reasons.

Qualitative Analysis

  • Screens to identify investments
  • Proprietary rating system
  • Monitor style consistency
  • Monitor risk factors
  • Performance attribution

Portfolio Construction

  • Risk profile relative to benchmark
  • Funds fit with portfolio’s risk profile and portfolio reflects desired investment bias
  • Diversify and eliminate blind spots

Qualitative Due Diligence

  • Interview managers and analysts
  • On-site visits
  • Study SEC filings and shareholder reports
  • Subjective assessment guided by the principle of putting the client's interests first