Investment Process
Target allocations and security selection are determined by a six member Investment Committee which meets approximately every eight weeks. Interim adjustments are made based upon weekly monitoring of shorter term market activity and economic data by a four member sub-committee.
The Investment Committee begins each meeting with a top down assessment of domestic and global economic and market conditions within the context of both secular and cyclical trends. Given that context, the committee’s focus is centered on emerging and established trends expected to be critical market drivers in the intermediate term. The resulting outlook is used to determine broad allocation objectives, such as net equity exposure, relative weighting of domestic / foreign / emerging markets positions, and regions or sectors that may be candidates for short positions. Similar considerations are applied to debt, commodities, real estate and currencies.
Within each broad asset class, specific sectors, regions, or themes are selected on the basis of considerations most applicable to each, including attractive fundamentals and/or relative strength. Securities are selected primarily from the universe of ETFs but may also draw from individual securities, closed end funds and open end funds based upon screening that seeks an optimal combination of asset class targeting, expense, trading efficiency, discount pricing, and, where applicable, unique manager expertise.
After completing the preliminary portfolio construction for major asset classes, the proposed weighting of assets is reviewed with further consideration for correlations, level of conviction, and assessment of relative risk/reward, and final targets are established.
To add value at points of entry and exit, the portfolio manager, Brian Kurtzer, has discretion to execute buys and sells to achieve targeted allocations after identifying trendlines and areas of resistance and support for the respective securities, underlying sectors, and the broad market generally. Buys and sells are executed with an objective of optimal pricing based on an analysis of technical conditions, market dynamics, and other factors such as ample liquidity. Predetermined stop loss areas may be identified and can serve as triggers to implement hedged positions or to increase or decrease core holdings.
To provide responsiveness to more rapidly developing concerns and opportunities, the portfolio manager has discretion to increase or decrease individual positions by up to 50% of target (i.e. a 6% target could be reduced to 3% or raised to 9%) based upon news and market dynamics. Such adjustments, while infrequent, are in practice made in consultation with the Chief Investment Officer, Gordon Wegwart, and at least one other Investment Committee member.
Collectively, the Investment Committee is a unique combination of multi-faceted investment management experience; equity and commodities trading experience; conventional investment training; and self-taught, market-tested independent outlooks. The resulting team delivers diverse strengths, conceptual checks and balances, and outside the box thinking that have been the foundation of the firm’s consistency and success through widely varying market conditions.