Outcomes based investment philosophy
RedStone Advisors utilizes an open arc platform that gives us the entire universe of funds to choose from. Our investment manager database has information on over 10,000 mutual funds, managed accounts, ETF’s, separate accounts, asset based, and risk based portfolios. This allows us to choose the best funds in each category based on our in-depth investment analysis. We also educate participants on the importance of a diversified and balanced portfolio and provide materials and education on the best asset-allocation based on a participant’s age and risk-tolerance.
Comprehensive Pass/Fail/Replace methodology
In fulfilling the fiduciaries’ duty to monitor plan investments, certain indicators have been selected to assist in determining whether a particular investment remains a suitable investment for the Plan. The Investment Review Scorecard is based on the last five years of data, utilizing a pass/fail system with a maximum possible score of 12 points: “Quantitative factors” represent 83% of the total score, whereas “Qualitative factors” represent 17% of the total score.
|Factors Used in the Analysis|
|17% Style Factors|
|33% Performance Factors|
|33% Risk-and Risk-Adjusted Factors|
|17% Qualitative Factors|
Each investment is evaluated against twelve criteria on a pass/fail basis basis in comparison to its appropriate benchmark for the designated time period. If the investments result is as good or better than the defined benchmark, it passes and receives 1 point. Whereas if it scores less than the benchmark for the designated period of time it fails, and does not score a point. This score is calculated for each investment option as of the final day of every quarter.
We work with the plan sponsor’s investment fiduciaries to define the number of indicators that must be met by each investment every quarter. This will be documented in the IPS and input into our fund evaluation system. A typical requirement is that a fund must score 7 out of the 12 possible points to achieve an overall “Meets Criteria” rating. If we define the acceptable number to be 7, then if the number of criteria met for a fund is 7 or more out of 12, the fund “Meets Criteria.” If the score is 6 or less, then the fund “Does Not Meet Criteria,” and is typically put on a quarterly Watch List. We will define within the IPS the number of times within a four-quarter period that a fund must “Meet Criteria” or it is a candidate for replacement.
Investment Policy Statement preparation and support
We work with you to develop and maintain the plan’s investment strategy, as defined in the Investment Policy Statement (IPS). This statement is the guide by which we evaluate current investment offerings and measure them against applicable indices, your provider’s complete menu, and the broader universe of investment options. Due diligence ensures that your plan’s investment options are diversified, appropriately managed, and address the stated objectives of your investment policy statement.
Ongoing investment monitoring and review
Our ongoing monitoring of investments for our clients’ retirement plans involves a regular and disciplined process. It is the mechanism for confirming that the selection process and its criteria continue to be satisfied and that an investment option continues to be suitable and appropriate for the participants in the plan. While frequent change is neither expected nor desirable, the process of monitoring investment performance relative to specified guidelines is an ongoing process. Our performance monitoring occurs on a regular basis and utilizes the same criteria that were the basis of the original investment selection decision. We will also call to the attention of the investment fiduciaries any unusual, notable, or extraordinary events on a current basis. Examples of such events may include portfolio manager departure, violation of investment prospectus or guidelines, material litigation against the investment management firm, violation of securities laws, or material changes in firm ownership structure.
Comprehensive fiduciary documentation
A documented framework for conducting plan due diligence is generally considered to be a fiduciary best practice because it increases the likelihood of sound decision making and timely action. We keep records of all minutes for due diligence meetings, investment reviews, and committee meetings within our Document Vault. Additionally, we provide annual plan health reporting that reviews the plan and committee goals for the year.
Our Document Vault provides a secure and efficient method to save plan related items such as: investment analysis, education materials and logs, plan governance tools, plan review materials, minutes, and more. The Document Vault is available to the committee anywhere at any time.
ERISA 3(21) or 3(38) Investment Fiduciary Status in Writing
We have the flexibility to act either in the capacity of:
ERISA Section 3(21) fiduciary, wherein we are appointed by one or more “named fiduciaries” and are given the responsibility to render investment advice to the named fiduciaries. This advice is then acted upon at the discretion of the named fiduciaries; or
ERISA Section 3(38) fiduciary, which is referred to as a “Discretionary 3(38) Investment Manager.” This type of fiduciary has full discretion for investment selection and monitoring, and may eliminate the plan sponsor from the investment selection and monitoring process if desired. The plan sponsor is, however, still liable for the prudent selection and monitoring of Pensionmark as the 3(38) fiduciary.