September 5, 2012

Envestnet to Focus on Fiduciary With Fund Evaluation Group Announcement

Partnership seen as complement to PMC, Prima research owned by firm

Envestnet announced Wednesday that it has partnered with Fund Evaluation Group, a hedge fund research and due diligence provider. The partnership is meant to complement the research on separate account managers, mutual funds, ETFs and liquid alternative investments already available on the Envestnet Prima platform.

“It’s really a response to client demand,” said James Patrick, managing director of advisor managed programs with Envestnet, when asked about the genesis of the partnership. “They are known in the industry for their heft, reputation and pedigree. We also have a number of clients that already utilize them, so that certainly helps when choosing.”

“We also wanted a firm with an independent process; one that was nonconflicted and took the fiduciary aspect into account in their due diligence process,” added Ryan Tagal, vice president of product management with the firm.

As part of the partnership, advisors that use the Envestnet platform will have access to research and due diligence reports on more than 40 hedge funds and hedge funds-of-funds that are covered by FEG. Advisors will be able to leverage research reports and information that include manager and strategy overviews, fund terms and service providers, historical performance and exposure detail. Advisors will also get access to quarterly monitoring reports including quantitative analysis and commentary on quarterly performance and organizational updates.

“Due diligence is usually driven by a checklist, one that includes verifying relationships, operational checks and onsite meetings,” said Alan Lenahan, managing principal, director of hedged strategies at FEG. “Our process is somewhat similar in that respect, but we differ in that we’ve been doing it for a long time and we have been doing it for a client base that with a deep-seated focus on the best-in-class managers and avoiding the problem managers.

Lenahan noted the firm’s six core areas it examines in its due diligence process when evaluating managers; conviction, consistency, pragmatism, investment culture, risk control and active return.

“We’re not just focused on finding the ‘safe’ managers,” he said. “We also want to find the best managers that can maintain alpha."

According to the company, FEG advises on approximately $33 billion in assets for institutional clients and has more than $3 billion allocated to hedge fund managers via direct investment from their clients as well as discretionary access vehicles. 

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