At Clearwater Portfolio Management, we take research very seriously. That’s why we invest in multiple layers of research so that we can understand our current and potential investments in great detail. As a result, we can be sure we’re investing in companies that deliver long-term growth.

Our research process includes:

1. Evaluating a new manager.

We always carry out an initial first step – or “Operational Due Diligence” - before engaging a new manager. First, we want to understand the manager as an organisation, so we send them a detailed questionnaire to complete. Second, we undertake “Investment Due Diligence” to understand their investment process. We need to know that the manager is stable and reliable, and that they’ve delivered against their stated process in the past, so we know what to expect in the future.

Our process includes understanding if a company has any legal claims filed against them. We also want to see evidence that they’re running a successful business and to understand the checks and balances they have in place. We follow-up each manager regularly, and we always meet if there are significant changes to the economy.

We want to make sure our managers are a good fit with Clearwater’s mission and values. In an industry often seen to be driven by excess, we choose to work with managers who have humility, respect and a clear understanding of how their decision making impacts our investors.

As part of our research efforts we subscribe to Lonsec Research to access in-depth, quality research covering traditional managed funds, listed products and alternative assets. While not a requirement of our investment process, we find that a large proportion of the managed funds we utilise in the Clearwater portfolios have favourable ratings from Lonsec Research, and this is a metric we track and monitor.

2. Considering financial records. 

The next step in our process is to dig into the detail about the manager and the way they operate their fund. A manager’s performance and attitude to risk have an impact on our portfolio, so we need to fully understand their approach, in particular how they make, and carry out investment decisions. 

Understanding how a business works tells us whether their process is sufficient to survive the inevitable challenges a company will face when the market moves up or down. In short, we want to see evidence that a manager follows their processes and shows discipline in the management of their fund.

We always meet with the managers we use. Meetings are part of the initial appointment process, and they’re repeated every six months. We ask each manager to complete a detailed document when we begin our relationship. Then we repeat the process at least once a year. 

The second yearly meeting is a combination of a presentation from the manager and a Q&A session with nominated committee members. What’s more, if we feel the need, we’ll ask for additional meetings with the managers in the months in between. 

3. Approval and recommendations

After the review process is complete, the committee members that attended the meetings with the manager will document their thoughts and make their recommendations to the investment committee. 

Following this, the investment committee considers the recommendations and discusses the funds.

It’s important to note that committee members often have different opinions. All views are encouraged, and we find that multiple ways of seeing the economy can lead to a deeper understanding of the market and better outcomes for the portfolio.

Carrying out change

The committee discusses the research, a recommendation is made and the committee votes. Assuming the committee agrees on the way forward, Clearwater carries out any changes and keeps a close eye on the impact those changes have on the portfolio.

Please note:

All meeting minutes are recorded. We implement any decisions immediately after the meeting.

Committee members have no vested interests with any of Clearwater’s managers. Each member must declare any holdings and interests that could lead to a conflict before each meeting. 

We do not restrict investment committee members from investing in the same funds that we use in our portfolios. However, we want to be aware of any potential conflicts so that we can consider if they will have a material impact on the investment committee’s decision-making process.