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PROCESS

The heart of our process is in-depth fundamental research. As a firm, we believe our core competency is individual stock-picking. We place our active weights in a manner to derive alpha from stock selection, as opposed to making large sector rotation or market timing bets. The team of Sector Specialists is empowered to make their final stock selection decisions.

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Idea Generation (Multi-Factor Model)

After defining the universe of potential equity securities for each product based on market capitalization, we utilize an internally developed Multi-Factor Model (MFM) which screens the initial universe of stocks in order to focus the Sector Specialists on potential investments that meet stringent valuation and profitability criteria. The MFM identifies undervalued stocks based on valuation, profitability, and capital efficiency relative to the initial universe. The output of the model ranks the universe of stocks according to their relative attractiveness.

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Fundamental Research

Once the proprietary MFM identifies a stock that merits further consideration, the Sector Specialists conduct due diligence on the company. This sector focus allows each Specialist to have very in-depth knowledge of a specific area, up and down the capitalization spectrum, versus trying to evaluate multiple industries as many generalists do.

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Investment Team Review

During the review of a Sector Specialist’s new idea, the investment team draws from its years of experience to provide different opinions and insight regarding the Specialist’s expectation of the company’s financial performance and potential profitability. This review allows the Sector Specialist’s assumptions to be challenged from multiple angles and to hear ways in which another sector may impact the proposed company.

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Portfolio Construction & Trading

Once the investment team has vetted the idea, the Sector Specialist instructs our trading team to take an initial position. The objective of the trading team is to keep total implementation costs at a minimum while providing best execution.

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Monitor Portfolio—Risk Control

Each product is overseen by a “Team Leader”, who is responsible for monitoring current positions, maintaining sector, model, and cash compliance, and conducting monthly product reviews.

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Sell Discipline

We sell stocks if our Multi-Factor Model indicates that an acceptable trade-off between valuation and profitability no longer exists, if the Sector Specialist believes the company’s fundamentals are deteriorating, or if the stock consistently underperforms its peer group.