For Zweig, claims of performance warrant more than untested and overconfident assertions.
Often, the closest example of post-termination analysis is something like the following scenario: One current investment committee chairman says that when he terminates a manager who had faith in a particular market sector, he checks to see how the sector performed after termination. But this process would not reliably reflect the performance of a specific active manager.
Conclusion
An investment committee can obviously strengthen its investment process with an analysis of post-termination returns. Committees may refocus on priority issues, and active managers may retain their posts for longer periods. This will reduce an investor's transition costs without sacrificing returns. Generally speaking, fiduciary liability begins and ends with adherence to a sound process; therefore, prudent fiduciaries will strive for a process that reflects behavioral and economic reality.
Michael C. Keenan, MA, CFP, JD is the founder of Fidelis Financial Planning LLC in Lynchburg, Va. and welcomes your correspondence at [email protected].