Investment Selection Process

McClelland Yarr Financial Services Investment Selection Process


We apply an investment process that takes account of fund performance (quantitative analysis), independent research (qualitative analysis) and cost in order to find the most suitable funds for our portfolios. They are then given a score consistent with our investment philosophy and simulated together as a portfolio to ensure that the past performance would have been within certain risk parameters. The following describes, in broad terms, the process by which we are able to identify what we believe to be the most suitable funds.

1. Past Performance

We average the performance of each fund over each of the past five years. This creates the performance score and ensures that no one spectacular year skews the results, but rather identifies funds with consistent performance.

2. Risk Adjusted Performance

We then collate the average of a number of statistical calculations that measure how much each fund was rewarded for the level of risk taken. This helps remove funds that may have good looking returns, but have taken disproportionate amounts risk.

3. Maximum Loss

Next, we calculate the largest fall from the highest peak to the lowest trough and give those funds that had fallen least with the highest score. This takes into account a type of risk that is not included in the risk adjusted statistical calculations mentioned above.

4. Independent Ratings Agencies

We have access to the ratings from three of the largest UK independent ratings agencies. These companies meet with the fund managers and compile massive amounts of due diligence from how the parent company is managed, down to the structure of the fund managers themselves. We create a score based on an aggregate of the results from these companies which gives us insight into the quality of the management.

5. Cost

We believe that funds with higher charges, really have to prove their worth, therefore we create a score based on the funds with the lowest total charges gaining the highest score.

6. Results

The scores are calculated across all of the investment funds in the sector and a total is calculated. This score is a measure of the most important factors when it comes to investing. After the funds are ranked, we analyse the highest scored funds to make sure they are suitable for their intended portfolio before making a recommendation to invest.

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