You can have many different selection systems, but the bottom line has to be a system that, once the judge takes office that judge will feel that he or she is to decide the case without reference to the popular thing or the popular will of the moment.

—Stephen Breyer

Chapter 14 addressed critical issues in portfolio construction related to equity, fixed income, and alternative assets, including the processes for the selection of individual securities within an asset class chosen by the wealth manager and client. Chapter 15 discussed how we measure, appraise, and attribute performance in these various asset classes. This chapter builds on those principles to define a process and structure around which a wealth manager can select investment managers from the vast universe of mutual funds and independent asset managers to manage investments within each asset class.

One of the reasons for separating this chapter from the preceding one on performance evaluation is to emphasize the point that the manager search and selection process is much more involved and nuanced than simply finding managers with the best historical performance. The practice of performance chasing has led many a wealth manager down the same path as the frenzied individual investor whose investment behavior tends to be one of the strongest contraindicators in investment management. According to the Investment Company Institute, fund flows into equity mutual funds and technology ...

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