Ciaran Mulligan, Head of Investment Manager Oversight, M&GPrudential T&IO, explains how his team make sure fund managers stay on track
How do you ensure the managers stay within PruFolio Risk Managed range mandates?
On an ongoing basis, including quarterly reviews, the team checks that each manager is operating within the confines of the fund objectives - and whether there has been any deviation away from expected performance or process.
If a particular investment style is out of favour, a quantitative only assessment could lead the investor to decide to sell out - potentially at the wrong time. This is where the combination of quantitative and qualitative analysis is particularly important, Mulligan notes, along with access to investment teams, because it helps to avoid making knee-jerk, ill informed decisions.
Is the process the same for the Risk Managed Passive funds?
Mulligan's team takes a different approach to due diligence for the Risk Managed Passive funds.
Here, they focus on whether the passive fund is tracking the index effectively, producing returns in line with expectations and has internal systems and infrastructure fit for purpose.
"The risk metrics and the analysis of performance are still there from a quantitative standpoint. From a qualitative standpoint there are similar areas we would explore, naturally there are different weightings for things," he says.
How does the team's focus on behavioural biases, part of its qualitative approach, stand out from your competitors?
"What's key for us is to be aware of the biases we have. There are different types of strategies and funds we all lean towards in different ways. I've encouraged the team to not to shy away from these biases and to be aware of them," explains Mulligan.
"If you try to incorporate the knowledge of these biases into your decision-making structure it improves the probability of making a decision that provides the best outcome for clients. The key to successful manager oversight and governance is to ensure the team is able to look forward."