The foundation of the investment screening process is a five step approach that is as individualized as are the clients themselves. Each step is executed by continuing to verify and challenge our own thinking to ensure that our clients’ best interests are being served.

Screening


Fiduciary Investment ProcessQuantitative Selection

Chao & Company’s quantitative selection process begins with the investment product universe (subject to the limitation of the custodian or trading platform) both passive and active investments. These selections are then screened based on the Investment Policy Statement.  At the end of the filtering process, a group of “best in class” investment choices are quantified within each investment asset and sub-asset class for further scrutiny and evaluation.  Using Modern Portfolio Theory statistics, proprietary regression analysis is conducted for each active investment.


Qualitative Selection Process

Due diligence is conducted by consulting with portfolio managers to add an important layer of analysis that provides a complete picture of the investment team’s tenure, their investment process, their unique value proposition and risk management techniques. Gaining a deeper knowledge of the investment company’s corporate structure, their sustainability and their compensation structure helps us understand their motivation and whether they have our clients’ best interests at its core. Finally, independent third party investment analysis is reviewed.

 

Implementation


Recommendation

Once all due diligence is completed, recommendations are presented to Plan Sponsor clients in assisting them in meeting their duty to prudently select plan investments in accordance with the stringent selection criteria under their investment policy statement.
 

Implementation

ERISA fiduciary investment consulting is an ongoing process that requires a commitment to ensure clients maintain the most prudent solutions. A balance should exist between a Plan that performs well for the participants and one that is run efficiently and cost effectively for the Plan Sponsor. Often identifying new technologies or procedures can ensure a Plan’s costs remain at appropriate levels.

The purpose is to design a plan with costs that are reasonable for the expected outcome and one that allows participants to save and plan for their own retirement.  Throughout the process an ERISA Fiduciary framework is overlaid to meet the duty of due care.

Review

Individual investment analysis is conducted on an ongoing basis to monitor the performance and behavior of each investment based on the strict criteria stated in the investment policy statement.  Qualitative reviews are conducted on an ongoing basis.  This process assists Plan Sponsor clients in meeting their duty to prudently monitor plan investments.