Describe how you raise and manage concerns when monitoring investment managers on ESG factors.
Our ongoing process for monitoring recommended managers involves conducting a quarterly review, which includes examining, as appropriate, the manager’s adherence to investment policy, objectives, guidelines, and risk controls. Analysts typically review risk and return statistics, portfolio characteristics, available performance attribution reports, quarterly letters, and have ongoing dialogue with the investment managers. Discussions with investment team members focus on significant changes to portfolio positioning, strategy performance, as well as changes to the portfolio team, investment process, and firm structure. Accelerated reviews of recommended managers may be triggered by the portfolio failing to adhere to its stated investment philosophy or falling outside of risk parameters. Other events causing accelerated reviews may include significant turnover in key investment professionals, change in firm ownership, excessive asset growth or investor redemptions, change in strategy and/or governance, draw-downs inconsistent with strategy, amended management terms, shift in risk controls, and operational/back office changes. As a concern emerges, we seek to engage investment managers in active discussions to provide our perspective and to suggest recommendations for resolving the issues. If there is no satisfactory resolution within a reasonable timeframe, the manager may be downgraded. Such concerns are generally communicated to clients either by email, or call when timeliness matters in requiring action, or during the normal reporting cycle.