Allocator Guide
A practical framework for allocators, family offices, and sophisticated individual investors reviewing an independent manager for the first time. This guide covers what to ask about philosophy, risk framework, fees, concentration, and operational controls before committing capital.
Framework
Ask the manager to describe their philosophy in plain language, then ask for examples of how it was applied in a market environment that did not favor it. A philosophy that only sounds coherent in hindsight, or that shifts to match whatever has recently outperformed, is weaker evidence than one that has been articulated the same way across different conditions.
A manager's risk process should be visible in how they discuss losing positions, not only winning ones. Ask what could impair capital in a given position, how that risk was sized before entry, and what specifically would cause the manager to exit or reduce a position. Vague answers about "staying disciplined" without a concrete downside framework are a weaker signal than a manager who can walk through a specific loss and what it changed in their process.
Concentrated portfolios are not inherently a red flag, but concentration without a clear sizing discipline is. Ask how the manager decides position size, how liquidity and correlation across positions are monitored, and how sizing responds when a position's risk-reward changes after entry. A manager who cannot explain their sizing logic beyond "high conviction" has not shown you a repeatable process.
Compare the fee structure against what it actually incentivizes. A structure weighted heavily toward fixed management fees, with a modest or absent performance component, rewards asset accumulation rather than results. A structure with a high-water mark and a meaningful hurdle rate before performance fees accrue aligns the manager's incentives more closely with long-term outcomes rather than short-term activity.
Investment due diligence answers whether the strategy is sound. Operational due diligence answers whether you can trust the reporting behind it. Confirm independent custody of assets, a third-party administrator or auditor unaffiliated with the manager, and a documented valuation policy for any illiquid or hard-to-price positions. A manager who self-administers valuation, with no independent party confirming the numbers, has removed the check that catches errors and misrepresentation alike.
Red Flags
Every manager has losing periods. One who cannot walk through a specific loss in detail, or reframes every loss as bad luck rather than a lesson applied, has not demonstrated a learning process.
Legitimate managers expect diligence to take time. Urgency to commit capital before questions are fully answered, or before independent verification is complete, is a pattern worth treating as disqualifying on its own.
Without an independent administrator or auditor confirming valuations, an allocator has no check against optimistic marking of illiquid positions, whether intentional or not.
A described philosophy that quietly changes to explain whatever has recently worked, rather than a philosophy applied consistently regardless of recent results, suggests narrative built after the fact rather than process applied in advance.
Printable Version
Leave your email and we will send the printable checklist version directly, along with a note whenever the firm publishes a new guide. No automated download, no mailing list — just a direct reply from the firm.
· Sent directly, typically within 1 business day
· No obligation, no sales follow-up unless you ask for one
· Your capital range only helps us tailor what we send — it is never required
Request received
Within 1 business day — the firm sends the printable checklist directly to your inbox.
No follow-up pressure — review it on your own timeline. Reply only if you have questions.
If you don't hear back within a few business days, email contact@touzani.com directly.
Related Pages
