Advisers Must Avoid ‘Due-Diligence Lite’ on Asset Managers
By Daisy Maxie September 10, 2014 Wall Street Journal The regulatory troubles of F-Squared Investments are a reminder to brokers and investment advisers of the need to do more than simply review the numbers a mutual fund company or other asset manager offers to demonstrate financial health and prowess. Analyzing how the company arrived at the numbers is critical, specialists in vetting asset managers say. F-Squared, which builds portfolios of exchange-traded funds, recently acknowledged a deepening investigation by the Securities and Exchange Commission into how it marketed some funds' past performance. Some brokerages dig deeper, or employ third-part specialists to help. In terms of ensuring that a performance record is accurate, most check to see if it is "GIPS compliant"--that is, it conforms to the Global Investment Performance Standards, a set of standards for...
