Investment Manager Qualitative Review 2022

Consilium NZ Limited

Background

On at least a three yearly basis Consilium Investment Committee (CIC) undergoes an extensive qualitative review of all recommended investment managers. This review is in addition to the quarterly performance review and annual update of the Approved Products List.

The basis of this review is a request for information (see Appendix A) sent to all recommended investment managers.

In this document we will summarise the types of information requested and our methodology for reviewing the results. We will then review a summary of the answers for each investment manager and, at times, comment on their response. Finally, we will summarise our intended follow up.

Fi360 Guidance

The two criteria of fi360 Practice 4.2 call upon the fiduciary, first, to consider qualitative factors which may impact investment managers and advisers and, second, to act appropriately to the circumstances.

Organisations, even investment management firms, are organic and will evolve – some will evolve for the better, some for the worse. The evaluation of an investment manager is not limited to an examination of performance figures and modern portfolio theory statistics. It should also include an evaluation of whether the organisationis striving for sustainable excellence ordetracting from the foundationof trust-based fiduciary relationships.

It is the goal of fiduciary excellence that underpins this exercise.

Informationrequested

The specific information requested is contained in Appendix A. Here, we summarise the categories. In column 1 we include the types of information collected. In column 2 we indicate what we are looking for in each category and how we will review results:

Information type The information we are looking for Ownership structure/major shareholders Have there been any changes to the organisational structure of the investment manager, including mergers or acquisitions?

Staff Has there been significant turnover in the professional or service staff of the investment company?

Adviser support services provided Does the investment manager provide the same or better level of service than is available in the marketplace for comparable fees?

Investment/fund managers

What is the tenure of the key investment managers running the fund?

Investment mandate Is the investment mandate firmly set so we can be confident that the risk of manager speculation and style drift is reduced?

Investment assets Are investment assets increasing and can we be confident that the manager continues to be a growing and viable business?

Performance

Best execution

How does performance compare vs median of peers, and is that explainable due to risk?

Are trading costs accounted and are procedures for best execution being followed?

Trade compliance Can the fund manager demonstrate adequate pre and post trade compliance processes?

Trading errors Are trading errors documented and are policies in place to avoid reoccurrence?

Liquidity Monitoring Can the manager outline adequate liquidity monitoring and stress testing processes?

Proxy voting Are proxy voting policies being executed in shareholders’ best interests?

Fees Can the manager easily increase the fee without adequate warning? What is the process for increasing fees?

Third Party Ratings

Reports

Requests for information

Investment education

What independent agencies (such as Morningstar, Lipper, adviser publications, etc) currently have a published rating on any of the funds identified in this questionnaire?

Do the reports contain all of the information that is necessary and useful to the responsible fiduciary? Are the reports consistently provided on a timely basis?

Does the investment manager consistently respond to requests for information by the fiduciary in a timely manner? Do the responses contain the information requested? Are the responses easily understood?

Does the investment manager provide adequate explanation of the investment decisions it makes and the factors it considers in making such decisions so that the fiduciary can understand and appropriately monitor such actions? Does the investment company provide support for investment education if this is an area where the responsible fiduciary is seeking support?

Insurance Does the firm have adequate insurance to cover its business activities?

Insolvency Are investors secure if the investment management firm were to become insolvent?

Independent verification

The firm is reviewed independently, and those ratings are generally favourable?

Regulatory reviews Can the manager submit details in respect of the findings of their most recent regulatory review?

Business continuity Can the manager provide evidence of a comprehensive BCP and when it was last enacted?