Asset management consulting is the only service Chartwell provides to clients. Our service goal is to help our clients to develop and implement successful fund management practices and strategies. To accomplish this goal, we support our clients with a full range of institutional investment services.

Chartwell’s areas of expertise:

• Investment Policy Formulation/Review
• Asset Allocation and Asset/Liability Strategies
• Historical Performance Evaluation (Managers and Funds)
• Investment Manager/Fund Selection
• Ongoing Performance Evaluation and Analysis
• 401(k) Plan Consulting
• Continuing Trustee Education

While we naturally customize service delivery to fit client needs, our full-service strategic advice is typically available to clients as part of the following Service Cycle:

In addition to the traditional asset management consulting projects, many of our clients rely on Chartwell for related financial consulting projects. These include:

• evaluation of gift annuity program structures for endowments and foundations,
• review and analysis of spending policies,
• debt capacity analysis,
• evaluation of capital funding alternatives,
• and custodian searches.

Investment policy statements provide clients and their investment managers(s) with a blueprint for structuring the investment program. The following elements should be included in a comprehensive investment policy statement:

• All investment goals of the Fund clearly and simply stated
• The Fund’s risk tolerance level carefully described
• All relevant investment restrictions or limitations identified
• A strategic asset allocation policy, including rebalancing methodology
• Detailed investment guidelines and expectations for each investment manager
• Performance benchmarks and evaluation time frames for each asset class/manager
• Performance review and communication policies for all investment managers

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Historic investment studies have demonstrated that a portfolio’s strategic asset allocation is responsible for 75-90% of a fund’s total return. Policy formulation and asset/liability analysis is an integrated two-step process. First one completes the asset allocation study itself, followed by development and adoption of an investment policy consistent with the study’s findings.

We help institutional investors identify a strategic asset allocation policy that represents the synthesis of optimal portfolio construction methods, forward-looking capital markets and asset class assumptions, and detailed expected liability/spending profiles. Our research group develops a set of input assumptions that we recommend our clients use for strategic asset allocation studies. These assumptions are based on a combination of:

Our asset allocation assumptions are strategic in nature — they do not attempt to anticipate or trade on short-term market volatility. Rather, we aim to capture the very powerful long-term diversification benefits present among primary and secondary asset classes.

During each study’s initial phase, we help our clients develop and deliver various critical inputs pertaining to their risk tolerance, return expectations and the liability structure of their fund, including:

Early in 1995, we pioneered the concept of an integrated spending model (“ISM”) for endowments and foundations. This captures the full range of cash flows opportunities and obligations faced by these organizations as asset allocation inputs, including investment return, program development, capital spending, debt service, and operating budgets. This ensures our multi-period forecasts will ultimately capture the “real world” asset volatility associated with varying investment returns and spending patterns. The result is a very careful, “granular” analysis of integrated returns and spending, which is especially useful in setting a strategic asset allocation policy specifically matched to each eleemosynary’s specific needs.

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Historical Performance Evaluation

Once a client has finalized a strategic target asset mix and affirmed a comprehensive investment policy, their current investment management team should be reviewed in light of its capabilities to successfully implement the new investment plan. When evaluating the current efficacy of each existing investment manger or fund, many traditional performance evaluation tools are used (index comparisons, universe rankings, etc). Beyond this, Chartwell looks closely at the following attributes in assessing the current management team:

• Consistently favorable returns versus peers and relevant benchmarks. We look at return patterns over rolling one-, three-, and five-year timeframes to evaluate the consistency of returns. We seek to eliminate “one hit wonders” through this process.
  
  
• Disciplined and repeatable investment process. Our clients deserve to understand, in very specific terms, how assets are managed and returns are generated. They should have confidence a successful investment pattern can be replicated.
  
  
• Avoiding redundancy in the composition of the investment team. For clients that have multiple managers, we strive to structure a team that compliments one another and maximizes diversification benefits.
  
  
• Experience and integrity of the investment team. To reduce our client’s implementation risk, we only want to work with honest organizations. Naturally, we expect the people who generated the attractive track record to still be managing the assets.
  
  
• Superior risk-adjusted returns. We expect to easily observe the positive impact of superior risk controls on client portfolios. When combined with consistently good investment performance, the result is superior risk-adjusted returns. This makes an existing management firm an attractive choice for retention.
  
  
• Superior communications and support for clients and consultants.

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Investment Manager/Fund Searches

We seek to provide invaluable assistance in support of our clients’ efforts to assemble a management team with complimentary skills and little style redundancy, thereby offering strong upside participation and sound downside protection in volatile markets.

Chartwell conducts every manager search independently. Once we have identified key selection criteria with our client, the screening process begins against a full database (includes over 4000 managers). By starting every manager search with a screening of the full database, we do not “miss” a manager with a superior developing record. However, we’ve also found that various commercial databases are only a good place to start the search process. Accordingly, Chartwell regularly conducts due diligence meetings with 200+ managers/mutual fund companies annually. We evaluate managers by looking at the people, process, and performance of the overall firm and the relevant investment “product.”

Each search normally incorporates the following steps:

1. We use quantitative screening criteria first, to identify the best performing managers. In most cases, we favor managers with consistently good historical returns and risk statistics over an extended period. These firms have made more “correct” decisions over time than managers with spectacular, but inconsistent, short-term historical performance. As an indicator of future success, the former type of record is more predictive. Beyond this, we affirm additional quantitative screening criteria after client discussions. Examples of additional criteria include market coverage, investment style, and style drift.
   
   
2. We then apply an extensive set of qualitative criteria to our list of top performing managers, including such issues as resource sufficiency, investment process repeatability, business management practices, and alignment with client goals.
   
   
3. The quantitative and qualitative process sharply narrows the number of candidate firms. To qualify for further consideration, we expect each candidate firm to have completed a “request for information” (RFI). To view a sample RFI, click here;
   
   
4. After reviewing RFI responses and conducting sufficient due diligence meetings, we provide our clients with a “short list” (usually 4-5) of recommended investment managers for their consideration;
   
   
5. We facilitate the final selection process, organizing further due diligence visits and/or finals presentations as appropriate, and helping our clients negotiate service contracts.
   
   

Unlike other consulting organizations, our client fees must cover all costs of the manager search process. Chartwell Consulting does not accept any direct or indirect revenue from investment managers to be included in any searches we conduct on behalf of clients. Additionally, the manager databases Chartwell licenses do not require investment managers to pay any direct or indirect fees for inclusion or searches. Our manager recommendations are a function of carrying out the above process completely, and solely, in support of our client’s best interests.

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Ongoing Performance Evaluation and Analysis

Performance evaluation is an ongoing process, not an event. Performance should be evaluated on a quarterly basis to ensure each manager is adding value and successfully implementing its “share” of the investment strategy. Chartwell’s performance reporting system has the capability of analyzing manager and portfolio performance many different ways. In our customized reports for clients, we review the client’s asset structure, any rebalancing requirements, provided performance attribution on individual managers, and recommendations for any changes that may be warranted. Our goal in performance evaluation is to interpret, rather than merely provided data. The interpretation turns a performance report into a valuable fund management tool, not just a piece of documentation. To view a sample performance report, click here.

In a typical client report we provide:

• Quarterly, year-to-date, calendar, and trailing period comparative returns
• Custom Index comparisons and Custom Universe rankings
• Comparisons for up to two added custom objectives (e.g., comparisons to CPI, nominal rates of return, additional index comparisons, etc.)
• Up and Down Market Cycle Performance analysis
• Performance Attribution analysis (e.g., analysis of a manager’s asset allocation and security selection skills)
• Risk Analysis
• Market Value and Cash Flow Summaries

Regular performance review meetings take place quarterly or as needed by the client, based on staff or committee preferences.

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401(k) Plan Consulting

When working with plan sponsors, we often begin with determining the best structure for their 401(k) plan. Specific services include:

• Evaluation of service providers (bundled, unbundled, alliances)
• Plan Investment Structure – determining the number and types of options to offer
• Request for Proposal Design and Implementation
• Investment Option Search and Evaluation
• Ongoing Performance Evaluation of Investment Options
• Design of Employee Education and Communications Programs, detailed below

Employee Education and Communications

A number of Chartwell’s 401(k) clients engage us to develop and conduct employee investment education and ongoing communications meetings. Virtually all defined contribution service providers include initial enrollment meetings as part of their full-service platform offerings. Some will conduct periodic update meetings at the request of clients, particularly if there have been substantial changes to the plan or the addition of many new employees/participants.

Despite the ready availability of DC service provider education and employee communication programs, Chartwell has often been asked to create and deliver customized investment education programs for the employees of our defined contribution plan clients. Our clients and their employees have found the DC provider programs to be lacking in communicating the best information/education to plan participants regarding how they should manage their own accounts.

As a result, a number of our clients have engaged Chartwell to provide semi-annual or annual investment education meetings. We customize the programs based on information our clients provide us regarding the pressing issues at their organizations. Examples of the investment themes we have covered for a variety of clients in the past include:

• Retirement Planning Tools to Use in Your 401(k) Account
• Managing Risk Through Diversification
• Managing Your 401(k) Account in Down Markets
• Style and Size Matter – An Introduction to Asset Classes

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Continuing Trustee Education

The majority of Chartwell’s clients would describe us as extensions of their financial staff or investment/finance committees. When dealing with mid-sized plans and funds, finance departments or investment staffs tend to be small and committees meet too infrequently. They rely on their consultants as “part-time” staff. Our clients rely on Chartwell to provide them with the investment expertise they may lack, or do not have the time to fully address internally. Serving as an extension to staff and a sounding board is a position with which we have a great deal of experience.

Some clients request our assistance in “training” their financial staff or committees in specific investment related areas. These include, but are not limited to:

• Asset allocation
• Risk/Return Analysis
• Specific Investment Products (i.e, TIPS, global fixed income)
• Rebalancing Techniques

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