Portfolio Implementation and the Consulting Process
The consulting process
A disciplined loop: discover (goals, constraints, behavioural profile), design (IPS and strategic allocation), implement (manager search, due diligence, funding), monitor (performance, style drift, organisational change), then review and adapt. Document every stage; the IPS is the contract that anchors later decisions.
Manager research
Combine qualitative judgment (people, process, philosophy, parent organisation, turnover, capacity) with quantitative evidence (risk-adjusted returns, attribution, holdings, factor exposures). Past performance is a weak predictor; the process is what persists. RFPs and databases help but favour survivorship-biased, marketing-savvy firms. Fees, whether asset-based, flat or performance-based with high-water marks and hurdles, must be judged net of tax and cost.
Implementation realities
Transitions incur costs; rebalancing can be calendar-driven or band-driven; currency hedging is a policy decision. Defined benefit plans focus on funding status and liability matching, while defined contribution plans and OCIO mandates shift responsibility to the adviser, raising fiduciary and disclosure duties.
Traps
Chasing recent top performers; firing managers after two to three years of underperformance when the process is intact; benchmarking against the wrong index; confusing non-discretionary consulting with discretionary OCIO; failing to document deviations from the IPS.
Worked example / rule of thumb
Judge a manager over a full market cycle and across rolling periods against the style-matched benchmark. If a value manager underperforms because value is out of favour, that is a factor headwind rather than a broken process; the decision rule is whether the people or the process actually changed.