Whether you run discretionary mandates for your clients, advise them on managing their own funds, or recommend others’ funds – your clients rely on you for their investment decisions. Success in your role is derived from a hard-won track record of integrity and performance – and performance for your clients may not equate merely to returns relative to the market. With hard-earned individual or family wealth, capital preservation may well be as important, if not more so, than outperformance. For your business, this means that the one stock you may get wrong this year may impact your year more than the 30 you get right – meaning you need to be aware of the risks in the stocks you are holding or recommending, and those held by your clients; or in the funds in which you are invested, or recommending. In fact, timely identification of risk may be the most impactful route to integrity and performance.
You and your clients may not even take Short positions. However, with the majority of sell-side coverage skewed heavily to Long recommendations and subject to conflicts of interest, it is not just the conclusions of this research, but its very character that can be impacted. Take, for example, a popular Western European growth stock with a high retail investor base, and where the majority of bulge-bracket sell-side analysts covering it rate the shares a Buy. Some of these firms have covered it since pre-IPO; some will be a corporate advisor or broker to the company; some will be interested in participating in equity placings or debt refinancings. However, all have a disincentive to engage in deep diligence: forensic accounting; governance analysis; thorough fieldwork. As a result, these areas go unconsidered and their tyres unkicked. Investors and advisors consuming such content as their primary source of insight are therefore in a state of blissful ignorance; unable to value the company fairly, unable to hold management to account, and unable to make a fully informed investment decision.
Our deep-dives, thorough diligence processes and regular screens all identify risks that the wider sell-side is not focusing on – and can make a huge difference not only in preserving your clients wealth – but also to the integrity and performance of your own business.
Reach out to our sales team to learn more.
