Our Philosophy and Process
We believe that emerging firms possess distinct characteristics and attributes that are highly correlated to investment success. Through skilled selection and portfolio constructions, the emerging manager value proposition can be unlocked for our investors.
Progress’ Investment Process is Comprised of Five Key Components:
Given Progress’ role as a leading manager of emerging managers, we benefit from a magnet effect as many new investment companies approach us as an initial step in their new business plan. Over the last several decades, Progress has become the first stop for newly formed asset management companies seeking both assets to manage and advice on the best ways to structure and operate their firms. We also actively search for new managers through diverse sourcing channels and prospecting strategies including Internet research, networking with a variety of industry contacts, and referrals.
Our research process combines quantitative and qualitative analysis to narrow the universe of emerging managers. First, we score managers across a variety of proprietary factors relating to performance, process, people and organizational stability. We then visit candidates from the top-scoring firms on our Research List, conducting extensive on-site investment and operational due diligence to better understand from a qualitative standpoint the rewards and risks uncovered (and to be further validated) by our quantitative analysis.
In addition to offering stand-alone manager-of-manager strategies in multiple asset classes, Progress excels at building custom, bespoke portfolios to meet explicit client guidelines. Both approaches reflect our level of conviction in specific managers, consider relative valuation, and control risk at the individual manager level and at the portfolio level. We actively manage style exposures to ensure that portfolios are concentrated in our primary area of strength — manager selection. By systematically refreshing the Focus List of best-in-class candidates, we are ready to restructure portfolios as necessary to ensure adherence to client goals and guidelines and to reflect evolving manager risk/reward profiles.
We have developed a strong focus on risk management, primarily through the use of investment guidelines and meaningful, but not limiting, portfolio constraints and guardrails, which, when used effectively, highlight deviations from strategy, strategy shifts and violations of policy. As a result, we are proactively alerted to any risk management concerns in order to avoid performance disasters. This risk management oversight is an essential component of Progress’s monitoring and ongoing assessment of a manager’s performance risk, not just at the point of selection, but over the life of the investment.
Our experience has taught us that business risk is just as important, if not often more important, than investment risk. Through the Progress Manager Assistance Program, Progress provides expertise to emerging managers that is critical to managing business risks, including advice on best practices in areas such as organizational leadership, marketing, incentive alignment, compliance and governance. We provide manager assistance focused on best practices as a key part of our investment process, either one-on-one or as part of specific programs, and never collect fees for this service. The Progress Manager Assistance Program allows us to establish greater transparency and stronger long-term ties in our relationships with managers.
Monitor and Rebalance
Progress’ quantitative scoring and qualitative due diligence process is systematic and extensive. We maintain updated quantitative scores on every manager and we visit funded firms on-site at least once a year with significant interim contact, which includes conference calls and meetings at our offices. Portfolio rebalancing occurs through an on-going process of identifying manager quality, alpha generation at the manager and portfolio level, and risk control. Our monitoring and rebalancing process results in portfolio-level reallocation and manager replacement, either due to underperformance or as a result of a manager’s transition to a direct-hire relationship with our clients.
Progress conducts regular formal reviews and fund rebalancing, which acts to decisively capture profits and limit losses. We want our managers to succeed. And when they do succeed and grow to mainstream status, we are ready to assist our clients should they wish to hire a manager directly.
Throughout this process, we seek to find and cultivate what we consider to be the gold standard: firms with proven potential to deliver persistent sources of alpha in repeatable ways combined with evidence of long-term organizational stability.