What Evidence Helps Verify an Investment Manager's Track Record?

Check a manager's track record by linking reported results to the investments and the people who made the decisions. A performance number in a presentation is a starting point. Find out how it was calculated, which accounts or funds it covers, and whether the team and strategy match the ones you are evaluating.

Match Results to the Current Team

Ask for a detailed history of the strategy, including the vehicle, dates, portfolio, and people responsible for decisions. If the manager presents results from a prior firm, ask which team members participated and what they controlled. Compare the resources and incentives then with those at the manager's present organization, including how it operated. A team may have experience elsewhere, but results do not automatically transfer when people, systems, or authority change.

Request supporting records, such as audited performance information where applicable, account statements, and an explanation of the calculation method. Ask whether the numbers are gross or net of fees and expenses. Find out how cash flows and valuations are handled, and how closed positions are treated. For returns based on estimates or private asset marks, learn how those values were set and reviewed. Have qualified professionals help assess records you cannot independently reconcile.

Look Across Conditions and Outcomes

A track record tells you more when you can see how the strategy behaved in different market environments. The number of years it covers is only part of the picture. Ask whether it includes rising and falling markets, and whether the manager followed the stated strategy through them. Compare performance with a relevant benchmark and peer group, while considering the risk taken to produce the result.

Study losses as closely as gains. Ask what drove the largest declines, how concentrated the portfolio was, and whether liquidity affected decisions. Find out what the manager changed afterward. Look at monthly or yearly results and how much depended on a small number of positions. In The Single Family Office, a family office executive describes examining whether a manager performed across different investment and market environments, and whether the manager delivered in the environments it said it could.

Check That the Process Can Support the Record

Interview the people who made the investment decisions. Ask them to explain the strategy in plain language, describe how opportunities are selected, and show how risks are monitored. Compare their explanation with written materials and the historical portfolio. A manager should be able to connect results to decisions and explain what would cause the process to change.

Keep a record of what has been confirmed, what remains unclear, and which claims rely on the manager's own reporting. A family can set an evidence standard before reviewing opportunities and apply it consistently across managers. Track record matters, but it is one part of an assessment that also covers people and process, along with risk, fees, and fit. For questions about a particular fund's terms or reporting obligations, talk with your attorney or CPA.

Read next: How can a family assess whether an investment sponsor has enough experience? and How should a family judge performance when a manager has a short history? and What does a family need to learn about a manager's past losses?

While track record is important, it is by no means the only predictor of future returns.

Sources: The Family Office Book, The Single Family Office. Informational only, not financial, legal or tax advice.