You’re an investor, you want help managing your funds, and you’re trying to figure out which investment manager to choose. How do you avoid casting your lot with the next Bernie Madoff?
Matthew Orsagh, CFA, CIPM, senior policy analyst with the Capital Markets Policy Group for the CFA Institute Centre for Financial Market Integrity, says in CFA Magazine that the Model Request for Proposal (Model RFP) developed by the CFA Institute Centre can give investors some questions to ask prospective managers.
Although the Model RFP is intended for use by institutional investors, individuals can use it to develop their own questions to ask potential investment managers. Using the tool to ask the right questions can help investors see red flags that indicate possible problems with an investment manager. Conversely, answers to the questions also can help confirm investors’ faith in their investment managers.
Orsagh contends that many red flags were missed by victims of the Madoff scandal, and if some of the investors had asked the right questions before investing with Madoff, they might have used a more cautious approach. The Model RFP can help investors formulate the right questions.
The Model RFP consists of three parts: Equity, Fixed Income, and Real Estate. All three parts are available free in PDF form from the CFA Institute’s website.
The Model RFP – Equity can be found at http://www.cfapubs.org/toc/ccb/2008/2008/6.
The Model RFP – Fixed Income can be found at http://www.cfapubs.org/toc/ccb/2008/2008/5.
The Model RFP – Real Estate can be found at http://www.cfapubs.org/toc/ccb/2008/2008/4.
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