Our investment vehicle of choice is open-end mutual funds. We can, and occasionally do, use virtually any other publicly traded security. However, our preference for mutual funds is based upon some important criteria; first and foremost is safety. The safety is a function of the very broad diversification offered by mutual funds. An individual fund’s holdings may range from dozens of individual securities up to literally hundreds. This allows us to build portfolios with the kind of diversification that generally accrues only to the largest institutional investors. Intensive research, professional management, liquidity, and style purity are a few of the other important considerations.

For a fund to qualify for inclusion in our portfolios it must possess certain quantitative and qualitative criteria. On the quantitative side, we start with a database of over ten thousand funds. We have developed a set of specific screens for each of the different asset classes and styles of funds. These screens are applied initially to select a core group of funds for more intensive evaluation, and then utilized regularly to monitor the continued acceptability of the fund. The most important of the qualitative criteria are: a well conceived, logical and persistently applied investment philosophy consistent with the asset class and investment style used; strong and deep analytical capabilities; long manager tenure; appropriate buy and sell disciplines for the asset and style managed; above average long-term performance; and perhaps above all, direct access to the portfolio manager.