Overview
OurProcess is definable, repeatable & sustainable

We analyze funds on the following five criteria.

Performance

Risk Control

Risk Adjusted Returns

Portfolio Construction

Operations

Fund Analysis & Selection Process
Has the fund earned reasonable returns relative to its Peer Group?

We judge performance of each fund relative to the appropriate benchmark and peer group. We also look at performance multiple ways because any one measure has weaknesses which can lead to mistakes. We want a manager who is consistent, not just hot.

	Performance
Trailing Returns	Rolling Returns	Batting Average
1, 3, & 5 year peer group rankings Standard method of judging performance Can be misled by extraordinary period	Rolling 36 month windows peer group rankings Shows consistency of returns	Consistency of beating benchmark over 36 month periods and 12 month periods. Shows consistency of returns

Fund Analysis & Selection Process
Is the fund incurring too much risk?

We analyze risk control relative to the appropriate benchmark and relative to the appropriate peer group. Many of our clients may not understand what a standard deviation of 35% means, but they do understand a fund that is more volatile than 82% of its peers. Also, we don't just judge risk by volatility but also by the direction of volatility, as upward volatility is a positive.

	Risk Control
Standard Deviation	Beta	Upside / Downside
Measure of absolute volatility Standard method of judging risk Analyze vs. peer group – otherwise just a meaningless number	Measure of volatility relative to a benchmark Standard method of judging risk Analyze vs. peer group – otherwise just a meaningless number	What direction is the volatility in? Improved method of judging risk Meaningful to participants

Fund Analysis & Selection Process
Is the fund incurring too much risk?

We then analyze funds on a risk adjusted return basis. A very conservative fund may lag in a bull market. This does not mean the fund manager has done a bad job. Too often plan sponsors hire conservative managers when the market is bad and aggressive managers when the market is soaring just to be disappointed when the market turns. We factor a manager's risk profile into our analysis.

	Risk Adjusted Returns
Alpha		Sharpe Ratio
Measure of excess return over expected return Often thought of as a managers value added Analyze vs. peer group – otherwise just a meaningless number		Measure of risk adjusted return Often thought of as the unit of return per unit of risk Analyze vs. peer group – otherwise just a meaningless number

Fund Analysis & Selection Process
Are there potential problems in the construction of a fund’s portfolio that have not revealed themselves in the fund’s returns?.

Perhaps most importantly, we analyze the actual portfolios of the funds. First we want to know if the manager is managing the fund as he said he would manage the fund. Secondly, this is where our forward looking philosophy has paid off in seeing potential hazards that have not yet shown themselves in the performance numbers.

	Portfolio Construction
Diversification		Style Consistency
Equity funds should avoid over concentration in any one sector, stock, or in the top ten holdings. Bond funds should manage duration and credit ratings		Managers should be consistent in how they manage money. Actual style should be consistent with the stated style

Fund Analysis & Selection Process
Who manages the fund and how much do they charge?

A defined contribution plan sponsor cannot ignore the operations of these complicated plans. Unfortunately, however that often happens when dealing with firms that do not specialize in this area and/or have the depth of background specifically in the defined contribution marketplace. Our hands-on understanding of revenue sharing, daily trading, internal compliance procedures, and all the other unique issues to this market add great value to our clients.

	Operations
Expense Ratio		Manager Tenure
Funds must be priced competitively compared to the peer group		The track record must belong to this manager

Overview

Performance
			Overall Due diligence is summarized and recommendations are clearly stated. The process is only as good as its execution so we keep it clear, simple, and relevant. We include a straightforward recommendation on each fund option with every quarterly due diligence report.
Risk Control
Risk Adjusted Returns
Portfolio Construction
Operations