Have you ever found yourself wondering about how your financial advisor decides what custodians and funds to recommend to you, or how you can be certain that they’re basing their decisions on the most current data? I sat down to speak with Laurie Belew, chair of the FJY Investment Committee, to find out a little bit more about the process, and what’s on the radar for 2018.
How does the team at FJY determine which investment managers they’re going to work with and which investment options they feel are the most worthwhile to pursue?
We have a dedicated Investment Committee comprised of six team members (who rotate on and off on a regular basis) which drives FJY’s investment decision-making process. Throughout the year, the committee performs asset class research and due diligence on investment selection to ensure that the choices they make best align with FJY’s core investment philosophy.
What are some of the things the Investment Committee is looking at when they review various investment managers and funds?
Our review process starts each January when we sit down to determine our priorities for the year ahead. We compare the performance of each of our approved investment managers relative to a predetermined set of benchmarks. Some of the key criteria we consider are: long-term performance, returns, and diversification benefits provided to the portfolio over time. If a fund shows that it has been underperforming certain benchmarks, we investigate the factors behind that drop and, based on those findings, determine whether or not a change is needed.
What were the findings of the 2017 benchmark comparison review?
We are pleased to report that our investment selection process continues to prove successful. We are generally happy with the managers we have selected and will continue to evaluate how to maximize risk-adjusted returns for our clients.
What’s in store for 2018?
• Managed Futures: evaluate to determine whether changes in the markets have affected long-term expected performance.
• Fixed Income:
o Address the differences in inflation protection provided by Treasury Inflation Protected Securities and contracts on the Consumer Price Index.
o While we continue to be pleased with the performance of our global bond investment, we will evaluate managers for foreign bond investments as some situations may call for a more concentrated position.
• Dimensional Fund Advisors: utilize their extensive research, including current data on the premiums offered by small-cap and value stocks, as well as the profitability metrics they are now utilizing in their strategies.
• Exchange Traded Funds (ETFs): is there a case for them? Review the merits when selecting investment strategies for each asset class.
• Real Estate: data shows that the benchmarks available for real estate investments perform quite differently at times. Review the benchmark differences and pros/cons of each.
• Continue to explore alternative investment strategies that may add diversification and inflation-adjusted returns to client portfolios.
Our Investment Committee continues to work diligently behind the scenes to ensure we are providing our clients with superior advice. Look for updates throughout the year, and as always, we are happy to review our efforts with you during an upcoming meeting.