Sun Venture Fund of Funds
The Sun Venture Fund of Funds team runs a rigorous evaluation process to ensure that we have the best-of-breed third party fund managers in our investment programme. We search for fund managers with sustainable competitive advantage that increases their alpha generation potential.
It is important that the selected fund managers can deliver sustainable value-add (Performance), on a net of fees basis, through their investment team (People) and investment operation (Process).
When we evaluate the fund manager’s performance, we look for consistency and persistence of alpha – evidence of a long and strong track record of investing in the same investment strategy.
We believe that a detailed performance evaluation can unearth truths about the fund managers – truths that are often glossed over or conveniently ignored. Performance attribution analysis and quantitative portfolio characteristics analysis often give great insights on the strengths and weaknesses of the fund managers.
The integrity and skill of the selected portfolio management team is key. When we evaluate the People aspect, we will consider the portfolio manager, the investment team (analytical resource and research support) as well as the wider organisational structure.
Portfolio managers require the support of analytical/research resources to implement their investment process effectively. Hence, besides evaluating the skills of the portfolio manager, it is imperative to evaluate the quality of the analyst team and identify any competitive edges the team might have. In addition, we pay particular attention to team stability, team size and team dynamics.
We also take into consideration organisational/ownership structure of the selected fund management company. We assess the level of team dedication to the strategy, and the support rendered by the organisation to the investment team.
We seek to identify the presence of a clear investment process. The process should be logical, robust and compatible with the investment beliefs of the fund manager. A well-articulated and consistent process with the right pairing of human capital is key.
As part of the Process evaluation, implementation is vital. We will evaluate how the ideas/ themes are implemented in the portfolio and if there are any issues with the implementation due to capacity constraints.
When selecting managers, we pay close attention to the fee structures and their impact on manager’s performance. We are allergic to high fees for which there are no reasonable economic explanation. Fees should be competitive and based on alpha (and not beta), and should also ensure alignment of interests between the fund managers and investors. For private investments, we seek LP-friendly terms with reasonable investment minimums and liquidity provisions.