Due Diligence Deep Dive - Jeff Markarian

Jeff’s Insights into the World of Investment Research

For over 35 years, we’ve been driven to provide access to the best managers and products available across the globe. Our research is the cornerstone of what we do, and our standards are high. Our stewardship and conviction – our ability to provide access to what we believe is an elite lineup of managers – stems directly from our Investment Research Team. Interested in how the team does what they do and how you can level up your own manager research skills? Jeff Markarian, Managing Director of the Investment Research Team, shares his thoughts based on his extensive experience.

With so much information available, where do you often start when it comes to investment research?

We’re in a fairly distinct position at Harbor where we have a vast network of investment teams we can tap into. Leveraging those partnerships is a great place to start. If it’s a question about growth equities, we can go to our Small Cap or Large Cap Growth managers and to our Large Cap Value managers. We’re able to pull from multiple sources to formulate a more holistic perspective. Whatever the topic is, we have the ability to access a wide industry network and build an informed opinion.

What do you believe is an often-overlooked area of due diligence, portfolio construction, or investment management?

I’d say performance is both overlooked and over-appreciated. Too many people anchor to performance without understanding the drivers of the manager’s expectations of what performance should be. There needs to be a shared expectation of when a product should perform versus just the performance itself.

What does the concept of hidden gem mean to you?

At the end of the day, we’re here to help people achieve their goals – retire, grow their wealth, etc. A true hidden gem should help enable investors to do that. It’s a compelling investment team that actually generates returns. It’s exciting to work at Harbor and give a voice to these types of teams, who have a truly strong product or way of doing things and who we believe can make a real impact for investors.

How has due diligence within the industry changed since you started your career?

No surprise, the biggest change is technology. When I first started, we were manually entering bank statements and using dial-up internet. Any analysis was Excel-based. Now we have much better technology, which has also led to much more robust data – and interesting ways that you can cut and slice that data. Altogether this has enabled great efficiency, but also more informed decision making.

What would you say to an advisor who engages in manager research but who may not have access to all the tools?

If you don’t have the ability to spend all your resources on manager research, then drill down on a manager’s alpha edge – the inefficiency in the marketplace the manager is trying to exploit and how they’re trying to exploit it. Do you think it’s a repeatable inefficiency? Do they have the tools and processes to repeatedly do so? If the manager can’t explain that, and you don’t have confidence in the purported alpha edge, it’s probably not a suitable partnership.

What’s a common reason that you’d choose not to underwrite a manager?

If our expectations for performance don’t align with their performance track record.

What’s the point where you know you’ve done enough to evaluate a manager?

It doesn’t exist. Your evaluation will always continue. Teams change, allocations change, markets change - the work is never done. That said, as long as you understand the manager’s alpha edge, we believe you can move forward confidently, whether you’re launching a product or implementing it into a client portfolio.

What’s a resource you rely on for staying on top of trends, tools, and best practices in investment research?

The best tool is honestly experience. Conferences are also helpful because those are the places where new ideas often bubble to the surface. After that, it’s your own network. You can always ask someone for their opinion or feedback. There’s definitely an industry expert out there when it comes to whatever you’re trying to learn more about, and if you leverage your network, you can typically get to that person.