Manager Selection

Far Hills Group is a pure sales business with two core constituencies, institutional investors and fund managers. To keep abreast of market opportunities Far Hills Group meets with hundreds of managers each year with an eye toward adding 1 to 2 managers per year to its roster of offerings. The selection process is led by our Head of Research with input from the firm’s partners and sales personnel. The firm typically works with 4 to 7 fund organizations at a time with assignments typically lasting 3 to 4 years for hedge funds and 1 year for private equity funds. Importantly, the firm’s manager-clients are not limited to locations in the US. Past assignments have included managers located in China, Brazil, and Israel. For our hedge fund clients, a threshold AUM of approximately $100 million with a 1 to 2 year track record is preferred, but the firm maintains an open door policy with respect to meeting with institutionally oriented managers.

Far Hills seeks strategies within a particular asset class that can be readily differentiated based on the manager’s skill set, a repeatable investment process and investor demand. We seek to identify high-quality funds with sound investment philosophies and strategies. Prior to representing a manager, we conduct rigorous due diligence on a manager's operations, risk-management practices, capacity issues, back office, investment discipline, and perform professional background checks. Analytical and quantitative reviews are used to evaluate managers to determine their competitive advantage over their peer group, as well as their correlation to a broad array of indices. The experience, talent, and integrity of the portfolio management team are key ingredients in our evaluation. We avoid conflicts of interest brought about by overlapping strategies.

The due diligence process combines quantitative analyses with qualitative input provided during several manager meetings. The typical selection process takes about 6 to 8 weeks. While there are no hard criteria for working with managers, the process focuses on the individuals, their past experience, the investment process, the investment organization and the track records of performance. The firm’s differentiating strengths are considered and sales obstacles are identified and thoroughly discussed during the manager meetings.

Judgment and experience of the firm’s partners are important inputs into the manager selection process. Relying on their long standing investor relationships and industry experience, they develop a sense of investor demand for not only the strategy, but the manager as well. The collaborative environment within the firm encourages brainstorming and encourages the sales team to evaluate prospective funds through multiple insightful viewpoints. The firm’s success is ultimately driven by its ability to more efficiently use the time of potential investors and our investment managers. Toward that end, we endeavor to gain a thorough understanding of investor needs and the investment process of our investment managers.

Far Hills Group sources managers through its investor base, prime brokers, existing managers, and the professional community that supports the formation of funds including attorneys, administrators, and accounting firms. Peer group comparisons, performance attribution analyses, upside vs downside capture, and alpha attribution are the starting points for consideration. Presentation materials are reviewed and recast for the institutional marketplace. Firm financing is reviewed and working capital needs are evaluated to ensure that business and operational risk are properly addressed. From there a full scale, institutional review is completed if both sides agree that an assignment is of interest.

Due diligence is an ongoing process and does not end once the manager and Far Hills Group agree to work together. The firm’s commitment to working with the highest quality funds goes beyond standard pre-investment due diligence to include independent ongoing monitoring, relevant web searches, transparency reports provided by the managers and periodic independent verification of assets, exposures and positions by the manager’s service providers.

When evaluating managers, Far Hills Group examines the critical ingredients that define an institutional manager. These include the manager’s pedigree, track record, investment process, infra-structure, outside vendors, location, references, risk management and anchor investors. A mosaic of these inputs are pieced together to see if they form an institutional whole. The impact of macro and broader sector variables are considered, but more importantly the focus is on manager alpha and their ability to generate absolute returns. Far Hills Group is opportunistic in its evaluation of managers, but the types of managers we typically work with fall into two broad categories: late stage emerging managers and mature managers looking to rebuild their institutional client base.