Step 2. Controlling Risk. We believe strongly in the power of diversification to reduce portfolio risk. For each portfolio we develop a long-term allocation using a wide range of investments. By diversifying across many asset classes and styles of investing we can reduce the risk of large losses associated with more concentrated investment strategies.

The asset allocation strategies that we use to establish our long-term allocations are grounded in reasonable expectations about the future, not how they performed in the past, since the past may or may not repeat itself. As markets move up and down, expectations about future returns change. We make adjustments to our long-term allocations to reflect these changes. The research underlying our asset allocation strategies is based on Gary A. Miller, CFA’s pioneering work in the field.

Sample Long-Term Allocation:

Step 3. Combining Managers. The next step is to combine our “genius” managers in a way that allows their unique performance patterns to complement one another. We believe that how you combine managers in a portfolio is as important as finding good ones in the first place. So we have developed a process for testing different combinations of managers to find the one that we think will provide the best likelihood of producing the desired investment results. We are looking for a combination of managers that will outperform the long-term allocation, particularly in down markets, while maintaining the desired risk characteristics of the portfolio. By understanding and taking advantage of the unique performance patterns of each manager we produce better results for our clients.

Complementary Combinations

Step 4: Ongoing Monitoring and Management. Once a portfolio is constructed, our job has just begun. We continuously monitor the markets, our managers and our portfolios. As return expectations of the asset classes change, we make needed adjustments to each portfolio. As we find new managers or better combinations of managers, we make the changes. As our research uncovers new information or provides fresh perspectives, we refine our investment processes. We are always watching; always vigilant; always looking out for the interests of our clients.