Investment Advisory

A: We believe that no single solution exists that meets the needs of every defined contribution participant. Within a single plan, the level of sophistication among participants can vary widely with some participants being new to investing and others being sophisticated managers of their retirement wealth. We strive to assist the plan in implementing a single solution that meets the diverse needs of this population without favoring one group at the expense of another. As a result, we believe solutions that acknowledge these participants' differences are necessary to create a successful retirement program. This means that we need to create investment programs that provide simplified solutions for the majority of employees while still offering the breadth of choices that more sophisticated employees demand.

A: The process for selecting a qualified default investment alternative (QDIA) for the plan is unique because of the visibility of the default option among the plan population and because of the nature of the types of investment alternatives that are chosen. The first step is to select the type of QDIA option to use within the plan. We have clients that utilize a single balanced option, a risk-based model portfolio, or target date fund series. Plans can also elect to utilize a managed account solution provided within the plan. There are pros and cons for each option, and the initial step in the QDIA selection process is to determine which option best fits the plan, its participants, and the investment objectives of the committee. In our experience, most clients select a target date fund series because of the simplicity of the option, its ability to provide an appropriate allocation for participants of differing ages, and the cost advantages compared to more "custom" solutions such as managed accounts.

Once the type of QDIA has been selected, the next step is to evaluate and select the specific product to be utilized as the default option. Assuming a target date fund series is the chosen option given its popularity in the market, the process begins with an evaluation of the plan design, plan demographics, participants' financial literacy, and the investment committee's investment philosophy. We lead the Committee through an education and data gathering presentation to solicit feedback from the committee and to identify the information that may factor into an appropriate target date fund series. Using the data collected, we score the universe of the target date fund series to identify the fund series that best match the plan demographics and investment objectives of the plan. Separate from the client-specific scoring process, our investment research team evaluates target date fund managers to identify those series that we would recommend to clients. They use a combination of quantitative and qualitative due diligence with an emphasis on in-person manager duediligence meetings. Similar to other investment strategies used by our clients, the investment analysts present their findings to Multnomah Group's Investment Committee, and the Committee decides whether a strategy is recommended for clients.  Using the client scoring and the list of target date fund series that have been vetted by Multnomah Group's Investment Committee, we prepare a recommendation presentation that compares two to four different fund series that meet Multnomah Group's standard for investment quality and most closely match the client's needs based on the evaluation of their plan demographics and investment philosophy. Based on this analysis, a recommendation is provided to the Committee for review and acceptance. A similar process is used for other QDIA types and adjusted based on the specific circumstances of each product type.

A: The firm’s manager search process begins with our proprietary scoring model. We score the universe of investment options each quarter and assign a score and peer group percentile rank for each fund. Using the quantitative scoring as an initial screen, our investment team then conducts its qualitative due diligence. The emphasis of the qualitative due diligence is to understand the investment management firm, its people, their investment philosophy, and the portfolio construction process. Throughout the qualitative due diligence process, the investment analyst is looking to understand why a manager scored well in our model, whether the investment philosophy and portfolio construction process are consistent with the past performance, and whether we believe the philosophy and process are likely to result in positive future returns. Ultimately, the qualitative assessment is the primary factor in determining whether to recommend a manager to clients. Specific criteria that are emphasized during the qualitative assessment phase are the stability of the investment management organization, the experience and knowledge of the firm’s personnel, the structure of the investment research team, the clarity of their investment process, and the risk management controls they use to maintain the portfolio.