Whats the process that allows you to benefit from the changes in market leadership?
Our strategy is based on relative performance and the approach is fairly straightforward. We classify the mutual funds by risk, which we measure by the level of concentration and by the historical downside record. To determine the different risk categories, we look at a combination of performance, volatility, portfolio construction, style, and management. Once we classify the funds, we rank them based on the average performance over the last one, three, six, and twelve months, or the various results within a year. The system is not overly optimized, and I believe that this is one of the reasons for its success. Effectively, we take a snapshot of the current winners on a bi-weekly basis but we rely on the monthly rankings for major portfolio decisions. Then we review the rankings to select the funds that are in the top 10% of their risk category for the portfolio. We have specific sell thresholds, and when they reach the threshold, we replace them with the current leaders. By consistent
