Unlocking Real Value Blog

AK In The News: Baird Dumps Wilshire, Hauls Fund Selection In-House

I was asked to comment on an article which appeared in today’s GatekeeperIQ (A Financial Times Service) on Baird bringing research on mutual funds in-house (and terminating its relationship with consultant Wilshire).

There can be many reasons why a B/D hires an outside firm to conduct due diligence and also why they would end such a relationship. Often times, as it seems to be in this case, it has more to do with the client’s ability to conduct the research  in-house, perhaps because of growth of staff or maturation of its programs, than it is dissatisfaction with the consultant.

To quote from the article: “The decision of whether to outsource some aspects of manager research is often a question of staffing and numbers, says Andrew Klausner founder and principal of consultancy AK Advisory Partners.“When you’re building a platform or expanding a platform, it’s easier to hire an outside research shop,” Klausner says. “As you mature, add staffing and add assets, it becomes easier to justify bringing it in-house.” Taking greater control over the process provides the home office greater say over the timing of research and the ability to decide whether to include affiliated products, he says. “You have a little more control over how things get done,” Klausner says.”

A sensitive topic is affiliated managers/funds. Hiring an outside firm to conduct due diligence on these products – even if you have the ability to conduct it in-house – is often a smart move to remove any potential (or perceived) conflicts of interest. I am a firm believer that adding this level of third-party oversight, especially on affiliated mangers/funds, sends a great signal to advisors and clients that you are serious about having only the best products available.

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