INVESTMENT PROCESS AND DUE DILIGENCE
CSM devotes significant resources to accessing third party software and databases, in order to evaluate existing and potential managers, and to optimize its portfolio construction. We utilize the software and databases to initially screen managers for performance and to benchmark their performance versus various indices. Subsequently, individual manager performance is evaluated in more detail using Sharpe ratios, correlations, standard deviations, and many other variables. We perform Monte Carlo simulations on model portfolios, using a variety of asset allocations and different combinations of managers, as a tool to understand likely future performance.
The principals of CSM have long and deep experience in the investment business, and as such possess a wealth of knowledge about individual managers, which we use to augment the above analysis. In addition, we frequently discuss managers with other major individual and institutional investors. To a lesser extent, we utilize information about new managers received from capital introduction groups of prime brokers and from third party marketers. CSM maintains an active list of both ‘long only’ equity managers and of alternative managers, targeting a variety of sectors and using a range of investment styles, which it is evaluating at any point in time.
Our due diligence process typically involves multiple meetings with both senior officers of the investment manager, as well as with individual portfolio managers and analysts. This process takes several weeks at a minimum and often several months. All new managers must be formally approved by our Investment Committee which includes Christopher Moore, David Kenney, Peter Pell, and Eric Hantman.