State of the investment manager addressMay 7, 2015
As FolioDynamix and FDx Advisors have grown over the years, so has the number of inquiries we receive from investment/money managers. Typically, we receive daily requests from managers looking to get onto our platform. With the myriad of investment manager inquiries we receive on a monthly basis, culling through these requests in order to find those that may be worth pursuing is not a quick task.
Our philosophy tends to be one of not adding more of the same. Unless a strategy is superior in some way, or unique to what we currently have on our roster (either as Approved or Access), we typically will not be inclined to add it. A compelling small cap manager with capacity will more often grab our attention versus a large cap, middle-of-the-road strategy. The ETF/Mutual Fund strategist space is where we are seeing the greatest increase in inbound inquiries. The number of inquiries has skyrocketed as the incumbent ETF strategists that initially gathered most of the assets in that space (industrywide, not necessarily on the FDx Advisors platform) have fallen.
Our research process is quite extensive, so we tend to be judicious with our full research additions. We only devote resources to those strategies that have a good chance of passing our due diligence process, and those we feel are compelling enough to garner assets on the platform. Frequently investment managers will provide marketing information to us, along with a note that they were recently approved on a competitor’s platform. Based on some of the strategies that we’ve passed over for full due diligence that have been approved on other platforms, we realize that our due diligence process is not the same as our competitors’. While no due diligence process is foolproof, we take pride in our process and find that adhering to it has served us well historically.
Along with the increase in money manager inquiries, we are seeing a decline in the number of model delivery holdouts. A few years ago, approximately one in five investment managers would decline to work with us on a model delivery basis due to concerns about trading efficiencies, intellectual capital, etc. As the industry evolves, and model delivery becomes more prevalent, we are finding that more and more investment managers are finally getting comfortable with the idea of model delivery. Fixed income is one area that still remains firmly in the traditional SMA world. When interest rates rise and fixed income becomes more attractive, there may finally be enough critical mass to enact change. Until then, there does not seem to be any change on the horizon for fixed income.
At FDx Advisors, we pride ourselves on our high level of due diligence, performance transparency and focus on helping our clients (banks, RIAs and broker dealers) offer innovative investment programs and portfolio allocations that support business growth.