The single most important aspect of selecting a money manager is the
Investment Selection Process. WWK's Investment Selection Process
specifically depicts the ten most important factors, both quantitative and
qualitative, in developing and maintaining a solid fund lineup. Our
process exemplifies how and/or why certain funds are selected.
Communicating these factors with our clients is extremely important.
QUANTITATIVE FACTORS
Performance
 In the
industry, a fund's performance is often not reviewed in sufficient detail. We compare how a fund performed versus a relevant
benchmark as well as performance within its peer group. We consider the
percentile ranking the fund received over different periods of time,
including the 1, 3, 5, and 10 year periods. We target funds in the top
one-third in their respective categories. For example, if a fund had a
ranking of 20, it outperformed 80% of the funds in its category. We avoid
funds whose long-term rankings fall in the bottom one-third of their
respective category.
Consistency
In addition to performance, we prefer a fund that has performed well
throughout a series of time periods. Although past performance is no
indication of future results, the longer record typically includes the ups
and downs of a full market cycle, where the short-term may not. It is
imperative that fund managers demonstrate the ability to consistently
perform well throughout different market cycles. Overall, we emphasize the
longer time periods.
Management Tenure
 This is probably the most overlooked category. After we have determined
that a fund has a good track record, there are two additional
considerations - the factors that went into their track record and the
probability that those same factors will continue to work in the future.
Although other components (See Investment Philosophy below) aid a fund's
performance, the manager or managers make the final investment decisions.
If a fund has a great ten-year track record and the manager leaves, how
relevant is the track record he or she produced?
Risk
Until recently, this category was not a concern for many people. After
the eye-opening bear market of 2000-2002, many investors have altered
their view. WWK has always considered risk an important factor for
investment decisions. A fund's beta and standard deviations are excellent
measures of risk. Standard deviation is a true measure of volatility. It
also allows us to compare funds with different investment objectives.
Costs
As always, the costs paid by the investor for the management services
should be reasonable. Most investors look at the cost to purchase a fund
instead of the cost of owning that fund over 5 or 10 years. The single
biggest fee that is overlooked is the fund's annual expense ratio. This
fee is taken directly from performance; therefore the client never sees
the fee. It is very rare to find a fund with a high annual expense ratio
with above average long-term performance. We also take into account any
wrap, insurance or annuity fees involved with a product.
QUALITATIVE FACTORS
Fund Family
It is important to understand the style and tendencies of a fund family.
We consider whether a family is inclined to have high portfolio turnover
or manager turnover, as well as their reputation for meeting the fund's
stated investment objective. We also review historical family data.
Increasingly, mutual fund families are liquidating and merging funds.
Conveniently, this allows fund families to eliminate a bad track record
distorting their actual investment results.
Investment Philosophy
 The management company's investment culture may truly be the most
important factor. The quality and breadth of the research, as well as the
internal incentive to share ideas, has a tremendous impact on the way a
firm manages money. Some funds are managed strictly on computer models
and balance sheet statistics. Other funds purchase outside research,
while others conduct their own. The global nature of a firms' research
department can play a role as well. Consequently, too many intangibles go
unaccounted for in model based investing. Additionally, we prefer
management firms that conduct proprietary research. Often, the best
research is not for sale.
Research Analyst
The specific role and experience level of the research analyst plays an
important part in the success of a fund. Typically, the analysts are the
most knowledgeable experts in their respective sector. They provide great
insight to portfolio managers because they are out in the field meeting
directly with the management, suppliers, and competitors. It is even
possible for these analysts to develop ongoing relationships with mid and
upper-level management, giving them further insight into the capabilities
of the executives running the company. Due to the importance of the
position, we prefer to see long tenures in this field.
Stability
The size and stability of the investment organization certainly plays a
role in our selection process. Typically the resources of a large
organization are an asset. The larger investment firms are able to
attract some of the brightest and most talented managers. We also
consider the impacts of whether a family is publicly or privately held.
In light of the "Mutual Fund Scandals of 2003", more emphasis has been
placed on the integrity of the fund family.
 Size
It is not necessary to be a large fund to be successful. However, the
advantages of economies of scale can be significant. Their buying power
typically provides cost savings to shareholders. We find that the quality
smaller shops typically tend to be more niche players. It is also
important to analyze the effects of the fund's ability to handle large
flows, whether positive or negative. How a firm handles large inflows
after a period of strong performance can have a notable impact on future
investment results. Large flows will cause some firms to close funds.
Conversely, the negative effect of net redemptions can cause liquidity
problems and can force a fund to sell securities at an inopportune
time.
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