Q:  What is your investment philosophy?

A: The Fund’s investment philosophy is to be invested at all times across a variety of investment styles, with the goal of generating steady returns in different market environments. The Fund’s goal is not to be boxed into one aspect of the market, but to be opportunistic and flexible. The Fund is managed by five managers who each have different and complementary investment styles. By putting them together, shareholders get a Fund that should be able to operate in a wide range of market environments. The Fund is anchored in domestic stocks and exposed to international markets.

It is a kind of ‘Best of the Best’ strategy with the investment team consisting of: a growth manager, a value team, an international manager, and two capital appreciation investors. Thus, we have the flexibility to provide investors with investment ideas – domestic, international, small cap, mid cap, large cap, growth and value. The goal is to always be diversified among investment styles and asset classes. The Fund will generally have less than 5% in cash.

Q:  What is the asset allocation ratio among these five sleeves of the fund?

A: Right now, the ‘Opportunistic Growth’ sleeve is 30%, the “Contrarian Value” sleeve is 30%, the ‘Concentrated Global’ sleeve is 20%, ‘Go Anywhere’ is 10%, and ‘Special Situations’ is 10%. We have the flexibility to change these numbers within a 10% range, but we have not changed the allocation since the Fund’s inception.

Q:  What do the portfolio managers of the contrarian-value sleeve look for?

A: The contrarian-value sleeve of the Fund looks for earnings-based valuations. Their first screen is to look for stocks with low price-to-earnings ratios that are trading at a 25% discount to the market. The team then uses the discounted-cash-flow model to determine what their earnings potential could be. The contrarian-value sleeve team has the flexibility to invest up to 20% in non-US stocks.

Q:  How about your capital appreciation sleeve?

A: The two portfolio managers of the capital appreciation sleeves of the Fund are multi-style and multi-cap managers.

Saul Pannell considers himself as having a blank canvas and without any predispositions as to whether a stock is a value stock, growth stock, domestic, international, large cap mid cap, or small cap. Going from a pure bottom-up standpoint, he identifies companies are that are most attractive to him; the metrics he uses vary based on the industry.

Frank Catrickes tends to be a little more thematic. He tends to have two or three themes that he sees as long-term moneymakers, and these themes drive his stock selections. That is why we refer to his sleeve as being a ‘Special Situations’ type of sleeve.

The fifth sleeve is managed by Nicholas Choumenkovitch who runs the ’Concentrated Global’ portfolio. He is more of a core manager focusing on large-cap stocks globally. When selecting companies, he will look at different metrics depending on the particular industry.

Q:  What is your benchmark?

A: The benchmark for the overall Fund is the Russell 3000, and for the Opportunistic Growth sleeve it is the Russell 3000 Growth Index.

Q:  What kinds of risks do you monitor and what do you do to mitigate them?

A: Overall, the portfolio managers of the Fund maintain diversification across various market caps, investment classes, and equity markets around the world. This diversification helps us during volatile periods in markets. However, to limit our stock-specific risk, we limit our investment in sectors and stocks to no more than two times the allocation in the index. This provides us with another layer of protection against bad stock picks, a surprise from management, or from a sudden change in business operations.

We control risk by having price targets, really understanding what we are paying for and what we think these companies are worth, and understanding the companies’ fundamentals.

Q:  Is there any process in place that looks at the overall portfolio for its risk control?

A: We have a product management group that works closely with each of the portfolio managers of the Fund to monitor the amount of risk that each one takes in their individual sleeves. For example, every portfolio manager meets frequently with a product manager so that he understands where the sources of risk are—whether it is at the industry level or at the company level. This also serves as a reality check to make sure that fund managers are staying within the mandate given to them by clients.

Aside from that, there aren’t a lot of restrictions on the five portfolio managers. We have a proprietary-manager trading system that checks for violations of specific guidelines every time a trade is entered. So if the overall portfolio has a 35% non-U.S. allocation threshold, and all five managers at the same time decide to buy non-U.S. holdings, the system will trigger a flag to let all five managers know that we have already reached the 35% limit, and each manager would then have to identify ways to lower their non-U.S. exposure.