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Monitoring – an overlooked aspect of fund selection

Digital future

There may be straightforward ways to optimise your monitoring and deselection process, but all these solutions have a downside in that they suck up vast amounts of time.

To enable fund selectors to spend more time analysing funds, the monitoring process should be largely automated, believes Roland Meerdter, a former fund selector at Deutsche Bank in the US. He now runs the consultancy DOOR, and together with the former global head of marketing at Aberdeen Asset Management Rob Sanders, he is developing an interface that aims to make fund monitoring a lot more straightforward than it is now.

Says Meerdter: “It started off as a project to establish a standardised due diligence questionnaire based on best practices in the industry, working together with a group of fund selectors representing 10 different firms in Europe.” 

The questionnaire, which is currently being reviewed, will cover all the things fund selectors ask fund managers during the selection process. But to make the exercise useful in practice, Meerdter realised there was a need to turn the questionnaire into an interactive portal accessible to every individual fund selector, making it simpler to compare and track changes to funds.

“The database, which will go live in February and will be made accessible to professional fund selectors who invest in third-party funds, will capture changes to the team, strategy, process, performance, etc of the participating funds. Fund selectors will receive notifications of any changes to the funds they want to monitor,” Meerdter says.

“This would save them a great deal of time, as I estimate fund selectors currently spend 60-70% of their time on collecting information about funds they already own.”

Twelve asset managers, including Schroders, M&G, Aberdeen, Franklin Templeton, Columbia Threadneedle and Nordea Asset Management, will make fund information available and provide funding to create the interface. “Fund due diligence questionnaires are also a concern for asset managers, who must dedicate significant resources to completing them,” says Meerdter.

Asset managers now must regularly fill in bespoke due diligence questionnaires for every single client. “But in practice, 90% of the questions asked by fund selectors overlap,” he adds. Automating this process would not only help fund selectors save time, but could generate savings for asset managers as well.

Making your fund monitoring process a systematic exercise will improve its quality and fund selectors can use all the time it frees up to do what they like most: looking for new funds.

Part of the Mark Allen Group.