In 2005, Daniel B. Wanzenberg launched the North American global multi-manager program for a Dutch based international bank, overseeing all aspects of the process: manager due diligence, client asset allocation and key client servicing. During this multi-year process, it was evident that a negative impact was being implemented on wealthy individuals, as well as Institutional clients, in the blending of multi-manager portfolios in the name of diversification.
When client solutions were viewed in aggregate, the solutions correlated too highly with an index fund to be presented as an “active management” solution. Each separate manager’s overall strategy moved very similarly with one another, which resulted in a lack of active share – fundamentally paying an active fee for a passive portfolio. This led to further research of each manager’s portfolios looking for pockets of consistent alpha generation. The result was that strong long-term managers tended to have the majority of their overall portfolio alpha generated within a limited number of sectors within their portfolios.
The next step in the process was to blend multiple managers’ alpha generating sectors, referred to as “mandates”, into one unique portfolio. Utilizing this analysis, a portfolio was created using specific mandates from multiple investment firms to provide a diversified aggregate portfolio based on stock selection rather than the more traditional process of utilizing a managers complete portfolio.