QUESTIONS TO ASK PROSPECTIVE INVESTMENT ADVISORS
What principles guide the firm’s investment process?
How does the firm determine the client tolerance for risk before it is exceeded?
What are the sources of revenues? Does the adviser receive only fees or a combination of fees and commissions?
What are the conflicts or potential conflicts of interest with those of the firm’s clients? Has the firm ever accepted compensation through fees from investment managers, mutual funds or “soft dollars,” which are trading commission credits, and if so has it specifically disclosed the amount of all such compensation to its clients?
How will the firm report periodic performance of your portfolio and are the reports clear and in the appropriate perspective relative to you the client goals and tolerance for risk?
What is the nature of the firm’s clientele and how concentrated are they by size and type? Are they more focused on growing your assets or theirs?
Who at the firm would be accountable to you, the client on a daily basis?
What are the specific reasons for the firm’s performance and what has the firm learned from intervals of underperformance and outperformance of relevant measures. Can the firm demonstrate consistency of process and decisions?
How does the firm communicate with its clients?
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Did You Know?Hedge Funds The vast majority of hedge funds execute strategies that are designed to reduce investment risk and limit the volatility of rates of return. |
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