Fundsters, it's time to clean up your acts. There's a new gatekeeper in town.

The investment research and consulting firm Segal Rogerscasey is expanding its due-diligence and gatekeeping offerings and as well as its client base. Already working with wirehouses, platforms and plan sponsors, it is now reaching out to large and medium-sized advisors.

"We continue to grow our client universe," Johann Jaramillo, associate director of consulting, recently told MFWire. "We have been working for decades with clients on the institutional level. Our intermediary business, which began over 20 years ago, is also expanding. We offer our services to wirehouses as well as advisors down to the middle-market. In addition, we are reaching out to regional and national broker-dealers."

Segal Rogerscasey has approximately $400 billion in assets under advisement.

  Depending on the specific client needs, they will do asset allocation modeling, asset liability studies, manager research, TPA manager research for the DB and DC market.

  They have a dedicated team for the advisory and intermediary channels. This is an area that they have been working with over the past 20-years. Their clients in this market segment include national wirehouses, regional banks, RIAs and independents, including those tied to the major custodians.

  The services for advisory and intermediary channels vary. For some of our clients, they provide due diligence and research on asset managers. Jaramillo says that their service complements client efforts internally and often are viewed "as a bolt-on research arm" for the client. For others they provide model portfolios and an approved list of “best-in class” strategies available through mutual funds and separately managed accounts.

  "In today’s day and age, if you are a sole-practitioner or a small office, it’s difficult to try to run an efficient practice and be all things to all clients. We bring to the table solutions, through our depth of research, that are intended to help financial advisors focus on their core competencies," he says.

A Research Trifecta

Jaramillo says that "research is the cornerstone of all our offerings and advice we provide our clients."

"We believe we have a unique research team structure. Our dedicated team of approximately 30 experienced individuals are divided into three main branches, Alpha, Beta and Global Portfolio Solutions (“GPS”)," he says.

  The three branches are:  

Alpha Investment Research:
Headed by Alan Kosan, this group of specialists identify best-in-class managers capable of generating alpha, regardless of investment style. The Alpha Group is divided by equity-like strategies, fixed-income-like, real asset-based, and opportunistic. Their responsibilities include:

Defining coverage of the investment manager universe

Generating and documenting research notes, opinions, and ranking of investment managers

Sourcing and monitoring best-in-class investment strategies for each one of the strategic asset classes defined by the Beta Research group

Seeking new alpha sources

  Beta Research:
Headed by John Ross, this group of specialists is dedicated to identifying, assessing, and recommending Beta exposure for all client portfolios. They will focus on asset allocation, asset/liability analysis, and capital markets and are specifically responsible for managing the following items:
 

Defining strategic asset classes

Formulating long, intermediate, and short-term views on strategic asset classes

Anticipating macro investment themes

Formulating capital markets assumptions

Developing annual research agenda

  Global Portfolio Solutions:
Headed by Tim Barron, Chief Investment Officer, this group is responsible for assisting clients with the implementation of Segal Rogerscasey’s Beta and Alpha outlooks into specific client portfolios. Members of the global portfolio solutions team will primarily interface with clients, prospects, and consultants and are responsible for:
 

Devising portfolio implementation

Synthesizing top-down strategic research from Beta Research and bottom-up investment research from Alpha Investment research to generate optimal portfolios for Segal Rogerscasey clients

Serving as a liaison between the consulting and research groups

Serving as a liaison between the marketing and research groups

Communicating optimal portfolios to Segal Rogerscasey clients

Jaramillo had this to say about his firm's research process:

  We act as a bolted-on part of their service model. We are not replacing anybody at these shops. We are adding supplementary capabilities. If they want to add products to their platforms and strategies, given that we have probably have done a lot of work from the institution side, we can add a lot of color or stories on firms, what have you. We can leverage all of the work we have already down and provide it in whatever fashion they like. It is a very customized model. We are really rolling up the sleeves and getting to know the firms that want placement on these platforms.

  We provide thorough research on firms and strategies that involves both a qualitative and quantitative assessment. Our research process has evolved over the past 44 years. Our strength in research is the ability to compare strategies not only on a relative basis, but on an absolute basis and to validate an investment process through our analysis.

Our monitoring process follows a similar process. Managers and strategies are continuously evaluated to ensure the current rating is justified. It’s important to note that our decision to adjust a rating is not driven by performance. However we’re not blind to performance, so it is one of the factors we consider to verify there isn’t an underlying fundamental change that may cause us to alter an opinion.

  Booming Demand for Outsourced Discretion
Jaramillo says his firm has seen a growing interest in outsourcing of investment discretion on the investment side.

"You’ve heard it before, but it is true that the line in the sand between institutional and retail investing is vanishing. We’re getting to a point where, more and more, we’re seeing a number of strategies that were once reserved for institutions becoming available to the retail public. This advancement raises the bar for research given the level of complexity this brings to the table," he says.

  For example, they now construct portfolios for various institutional entities, such as Taft Hartleys, corporations, endowments, foundations, higher education institutions, etc.This service is available on a discretionary and non-discretionary basis.

  "This discretionary function with our “best ideas” portfolios, has grown into its own distinct business line," he says. "This had been already baked into the process we have here, but now we're going one step further."

    In addition to their traditional institutional business, Segal RogersCasey now has implementable portfolios at the advisor level (RIA channel) that complements their research. They have models with over five-year live track records.

They have also developed customized target date funds for their DC plans.

  Moreover, they have also set up their own proprietary co-mingled funds. This service known as MasterManager, is a set of 26 “building blocks” that span across various asset classes used to implement an asset allocation.

Growing Client Base
  Jaramillo says that the firm is "getting a lot of interest from what we would call mid-tier RIAs." These are established RIA’s with an internal research team looking to expand the depth and breadth of coverage, he says.

"Given our position in the investment community, these firms leverage our ability to access portfolio managers to provide valuable insight.Realistically for RIAs, hiring experienced research analysts can quickly become an expensive proposition. For this reason, an outsourced solution may be an attractive alternative," he says.  

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