Manager Selection Process and Due Diligence

• NZAM’s research approach focuses on quality rather than quantity. To identify potential new fund managers to research and eventually invest with, we use our extensive global network of direct industry peer group contacts, as well as personal referrals from existing fund managers. We believe that researching and accessing the top tier of fund managers globally drives returns, rather than merely trying to use data bases and performance tables to make asset allocation decisions. It is NZAM’s ability to identify and gain access to these top tier managers that gives us our competitive edge and unique market position.
• We conduct a thorough due diligence of all prospective fund managers and strategies. This normally takes 9 – 18 months and involves a thorough analysis of their performance and strategy as well as a number of on-site visits to the fund manager’s office regardless of where they are based globally before we invest with them. This process reflects our need to feel completely comfortable with both their methodology and performance so as to understand the source of their investment returns and how they might perform in various market conditions.
• We also carry out thorough due diligence on their custodial, prime broking, auditing and any other financial arrangements to ensure that they meet strict international standards. We conduct third-party reference checks on new managers which may involve contacting existing investors or utilising our network of managers to seek further background information.
• NZAM only invests with managers where there is complete transparency of the strategy, exposure, and where necessary, to the underlying holdings. It is also crucial for us to be able to have a good understanding of the strategy, allowing us to build an accurate picture of the risks and the rewards.
• We believe that our lengthy due diligence process also allows a potential manager to carry out due diligence on NZAM. We believe that the relationship has to work both ways, because outstanding fund managers are also very selective about whom they select as clients.