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Alternative Assets Subcommittee

Fund SubcommitteeOur Alternative Assets Subcommittee employs a disciplined approach to fund selection which includes a combination of quantitative screens and qualitative analysis to build a list of mutual funds and ETFs that are approved for purchase and retention.

Quantitative analysis focuses on returns, risk, style, style drift and portfolio structure, whereas our qualitative review involves manager interviews to evaluate the investment team and the quality of the investment process.

Mutual Funds

We conduct a search to identify mutual funds that meet both the quantitative and qualitative investment criteria listed below and are available for investment.

  • Minimum Size: $100 million in assets under management
  • Manager tenure: Lead manager has a minimum 5 of years at the helm
  • Minimum Morningstar Rating: Three Star Overall Rating
  • Expense ratio: Below the Morningstar category average

Exchange Traded Funds

With respect to Exchange Traded Funds (ETFs) and their index-based nature, our selection process requires identifying ETFs that will provide the desired asset class exposure with the most optimal underlying characteristics. Other factors taken into consideration include:

  • Expense ratio:  Preference is given to funds with the lowest expense ratio within the desired category if all other criteria are satisfied.
  • Benchmark:  The ETF’s underlying benchmark is analyzed and compared to the alternate benchmarks within the same asset class. Factors considered when looking at benchmarks are construction methodology, rebalancing frequency and sub-sector exposure.
  • Tracking error: Minimal tracking error to the fund’s index.
  • Minimum size:  $50 million in assets under management, but assets advised/managed by MainStreet Advisors shall not represent more than 10% of the fund's total assets.
  • Minimum daily volume: Consistent daily volume sufficient to meet our clients’ trading needs.
  • Liquidity: Liquidity of the underlying securities must be taken into consideration as this is the main issue affecting a fund’s tracking error relative to its benchmark.

Once we have completed our quantitative and qualitative assessment of a mutual fund or ETF, a fund due diligence report will be prepared and distributed to the Investment Committee. The Investment Committee will then vote whether to include the fund on the MainStreet Advisors Approved List.