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In Pursuit of Excellence: Finalists for Envestnet/IA Asset Manager Awards

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When Horizon Investments won Envestnet’s overall Asset Manager of the Year award in 2018, it wasn’t only because the firm had strong performance.

The group was the “most compelling” in “leading the charge in goal-based investing solutions, and we really think that the market is moving more toward goal-based investing. We were celebrating [CEO Robbie Cannon] as a pioneer,” says Tim Clift, chief investment strategist for Envestnet.

Cannon and his team also won the award in the Strategist category, the fastest growing space on the Envestnet platform in number of strategies. The category differs from the six other awards due to its use of multi-model portfolio managers and inclusion of ETFs or mutual funds rather than individual stocks or bonds.

This year’s 15th-annual Envestnet & Investment Advisor Asset Manager Awards, will be presented in Austin, Texas, during the firm’s annual Envestnet Advisor Summit on May 1. The conference showcases the firm’s software and platform to some 2,000 attendees, and it includes awards presentation to the top asset managers, which are selected from its platform of thousands of strategies.

The event promises more buzz with Envestnet’s recent $500 million purchase of MoneyGuide, Tamarac’s acquisition of PortfolioCenter from Charles Schwab, and Yodlee’s purchase of Abe AI. The summit also will feature VIP speakers like former Secretary of State Colin Powell, Nasdaq CEO & President Adena Friedman, and popular advisor and blogger Michael Kitces. Plus, winners of the Envestnet Essential Advisor Awards and Invest in Others Grant Program Recipients will be honored.

More on the Asset Categories The largest Envestnet asset manager award categories are large-cap and small-to-medium cap, in which two awards each are presented. Other categories include international/global universe, fixed income, impact and strategist.

A new category added this year is alternatives, which is growing in importance as a strategy as market volatility rises, Clift says. “Alternatives is really the liquid alternative space, so think market-neutral, long-short or arbitrage types of strategies,” he says.

Only actively managed strategies are up for awards. As Clift explained, “there are a couple instances in the strategies space where they might be using passive products underneath, but they still are actively managing portfolios and allocations.”

Clift acknowledges there has been consolidation in the active space, but he says what they’ve seen is mainly the impact of reduced fees.

“There’s been some decompression [of fees] from the active managers to make them more competitive, and that’s generally healthy for the market,” he says. “But they still need to get paid for their services. They aren’t an index. We just have to make sure that whatever they’re charging, our investors are being compensated for it in excess return.”

He adds that the pool of active managers Envestnet reviews hasn’t shrunk. In fact, staff members look at roughly 10 new strategies on a weekly basis to determine if they should be on the Envestnet platform.

Further, “we actually did see [active managers] start to perform well in the fourth quarter when the markets got really volatile,” Clift says. “And they’ve continued to perform pretty well into 2019. When markets get volatile like we’ve seen … active management shines.”

Another area that is slowly growing is the Impact category. “[Environmental, social and governance investing] has gotten a lot of headlines, but it hasn’t necessarily grown immensely in [advisor] assets at this point. But it’s gotten a lot of attention and advisors are asking about it more,” Clift says.

To qualify for the awards, a manager must have $200 million in assets, be broadly available on the Envestnet platform and be open to new investors, and the lead manager needs to have at least a three-year tenure.

Beyond that minimum qualification, the managers then have to meet other criteria to be considered. “The quality of the people is certainly key,” says Clift. “Culture of the organization [also] is very important. How much they get input from different resources within the organization versus having it all dependent on one person [is key],” he adds.

“Finally, it seems to go without saying that the process has to be somewhat unique to be able to generate alpha. And it has to stand up to how they actually are investing,” the executive says.

In addition to Horizon Investments win in the Strategist group, other Asset Managers of the Year in 2018 were: for Large-Cap Asset Manager, Wakefield Asset Management and Dana Investment Advisors; for Small-/Mid-Cap, Kayne Anderson Rudnick and Baird Equity Asset Management; for International /Global, WCM Investment Management; for Fixed Income, GW&K Investment Management; and for Impact, ClearBridge Investments.

How Asset Manager Award Finalists & Winners are Chosen For 15 years, Investment Advisor and Envestnet have partnered to find, select and honor asset managers in multiple categories. The process of selecting the finalists is organic, with Envestnet analysts doing the heavy lifting and culling down from hundreds to find the top performers for each class.

The Envestnet analysts research each category for best-in-class managers using several metrics as well as meeting with most management teams to trim down the list of finalists; each category can start with 20 to 100 managers.

The analysts make detailed presentations on their top choices to the selection committee. This year, the group who deliberate and vote on the winners is comprised of Envestnet’s Clift and Managing Director Erik Preus, CFA, and Investment Advisor’s Editor-in-Chief Janet Levaux and Executive Managing Editor Ginger Szala.

The committee relies heavily on the research and due diligence expertise of the Envestnet analysts. These analysts know the asset managers and their teams personally and visit their offices, in addition to collecting and analyzing each manager’s performance numbers and key indicators like market upside and downside capture.

Envestnet’s proprietary systematic and multi-factor methodology evaluates managers on both qualitative and quantitative critieria, including investment process and style, performance, firm profile, customer service and tax efficiency.

After Envestnet’s analysts present their recommendations, providing performance data, governance structure and other underlying information, the selection committee exchanges opinions and picks the winners. The winners in each category and Manager of the Year will be named at the awards presentation in Austin.

Ginger Szala is executive managing editor of Investment Advisor. She can be reached at [email protected].