A Suite of Evidence-Based Methods for External Manager Selection

Empirically offers institutional-grade strategy evaluation capabilities tailored to the needs of the world's most sophisticated and heavily-scrutinized asset owners and fiduciaries.

The critical task of disentangling fund manager skill from the influences of random volatility and risk taking is fraught with complications: short histories, differing opportunity sets, and fluctuating factor performance all frustrate evaluation efforts.

In response to these challenges and the backward-looking nature of standard assessment metrics, qualitative assessment (focusing on the "four P's") has assumed a dominant role in most search and review processes.

Yet properly constructed quantitative metrics have an important role to play in final selection, not only initial screening. Empirically specializes in due diligence analytics and tools that enable more confident decision making via precise identification of the risk, return and non-financial tradeoffs at stake.


Insight: Putting Qualitative Due Diligence Processes to the Test >>


How We Work

In conjunction with your existing diligence and portfolio management processes, our solutions add value at specific decision points related to hire/fire decisions:

  • 1. Define Objectives

    Our customized deliverables are calibrated to the goals motivating the potential use of an active strategy:

    • Outperformance: Generating returns in excess of, or at lower risk than, a reference index
    • Uniqueness: Accessing investment opportunities which lack a suitable passive alternative
    • Non-Financial Priorities: Implementing additional targets, such as ESG and diversity considerations, at the end investment or fund manager level

    Our analysis takes into account the client's broader asset allocation and existing manager lineup, and can accommodate additional priorities such as minimizing the risk of falling short of required returns, or balancing longer-term gains with shorter-term performance risks.

  • 2. Apply Tools

    Bringing to bear our purpose-built methodology, we can generate robust answers to complex and multifaceted evaluation questions. Our core tools include:

    • Reformulating the problem in ways that enable the application of cutting-edge statistical and machine learning techniques
    • Harnessing our vast proprietary data pool to calibrate, test and deploy high-accuracy models
    • Incorporating multiple types and levels of uncertainty to facilitate the structured exploration of potential outcomes

    These tools enable us to provide deliverables that gain common acceptance, even among decision makers with differing views and priorities.

  • 3. Communicate Findings

    We report our findings using plain language and elegant explanatory diagrams that directly tie into the client's objectives, with no ambiguity or translation needed. Our output conveys:

    • Our conclusions, with probabilistic confidence intervals
    • A sensitivity analysis of the conclusions to alternate scenarios, including different preference sets and future expectations
    • The methods we used to reach our findings, and their rationale
    • The assumptions, limitations and potential sources of estimation error in our work

    Additionally, we can present and discuss our work with investment committees and other client stakeholders as required.

 

Capabilities by Asset Class

See how we harness our proprietary data and technology to answer critical due diligence questions in a clear and rigorous way.

Equities

Overcome the challenges of short track records and fluctuating market environments to assess managers versus passive alternatives.

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Fixed Income

Adjust for off-benchmark exposures and index inefficiencies to uncover the true skill level of a manager and estimate future value added.

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Hedge Funds

Open the black box of hedge fund strategies to better understand the drivers, quality and repeatability of past results – and determine which managers possess unique alpha sources.

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Private Equity

Harness sophisticated custom benchmarking and analytics to quantify the true skill of a private equity management team.

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OCIO Search

Determine which candidate OCIO provider is likely to add the most value net of fees, within the scope of its discretion.

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What guides us?

🧭 Explore the Empirically Compass