With the S&P 500 Index flat thus far in 2015, our Investor Objective Based Portfolios are

experiencing exceptional returns[1]; +12.3% Japan, +9.9% High Growth, +9.7% Euro

Centric, +7.2% MicroCap, +6.7% Emerging Markets, and +5.7% High Dividend.

Our success, we believe, lies in the fact that these portfolios are designed to achieve

the stated goals of individual investors, such as High Growth, High Dividends, Capital

Preservation, etc.

Institutional Managers on the other hand generally utilize “Market Definitions” such as

Domestic Large Cap, Mid-Cap and Small Cap along with a strategy descriptor such as

Value, Growth or Blend.

In our view, unless an investor has an in-depth understanding (risk, value, investment

cycle) of the entire market and the various segments within, knowing that a portfolio is a

Large Cap Value Fund is not particularly useful.

Institutional Investment Committees with the assistance of consultants, strategists and

analysts set targeted percentages for each market segment such as Large Cap Value,

Large Cap Growth, Small Cap Value, Small Cap Growth, etc. While the amounts

allocated might be reviewed and adjusted quarterly, the time frame for being invested is

often perpetual and thus quite different from most individuals.

Investor Objective Portfolios may find themselves with large allocations to a particular

market segment (e.g. many High Growth Funds invest heavily in Info Tech and Biotech

stocks), but we believe that investors seeking consistent growth require more freedom

to pursue the investor’s stated goal.

For example, an investor following an institutional allocation approach might choose to

invest in a Small or Mid-Cap Domestic Fund for his allocation to growth which may be ill

advised for the following reasons:

If an investor enters a segment at a time when it is overvalued, it may

take years to catch up or to show above average growth.

Some of the greatest growth stories over the last five years are IPO’s

which have become mega-cap companies and would have never been

suitable for purchase by a Small or Mid-Cap Manager. Examples include

Google, Tesla, Under Armour, Facebook, Visa, Alibaba, etc.

Fast growing and well-run companies can be found across all

geographic borders. Therefore, a food company selling noodles in China

might be outgrowing Facebook and may offer a better investment

value.

A well run small cap company may ultimately become a large cap

company thus requiring sale by a small cap manager. A growth

manager will hold the company as long as growth remains exceptional

relative to the market.

Twenty years ago, managers began to realize that “Institutional Think” and “Herd

Mentality” might not be in the best interest of their investors and created Hedge Funds

to provide more freedom to pursue investor goals across multiple assets classes.

And while most Hedge Funds have morphed into vehicles that offer disproportionately

high risk to justify high fees, we feel that the initial concept of providing manager

flexibility to meet investor objectives is sound and well suited for the individual investor.

Bear in mind that all managers encounter periodic macro headwinds, most of which are

unpredictable in terms of onset and duration, but these headwinds are often temporary.

Therefore, a high dividend portfolio manager who holds top tier companies across

different market segments, industries and geographic boundaries may be negatively

impacted by an unexpected Fed announcement of raising interest rates. Growth

strategies on the other hand might be adversely impacted by a GDP Report that falls

short of expectations.

However, the portfolios that come back the fastest and resume satisfying investor goals

are the ones that hold the best companies and resist panic selling and return chasing.

Thus, we recommend that investors identify managers who have a track record of

finding exceptional companies and remaining patient and rational during turbulence, a

process which is often rewarded with strong results, such as +10% in the first three

months of a sideways year.

The preceding represents the views and opinions of The Stanley-

Laman Group, Ltd., a Registered Investment Advisor serving

individual and institutional investors and is not intended as

investment advice nor are the opinions offered suitable for all

investment objectives.

 

[1] Returns are based on SLG separate managed account composites for 1/1/15 –

3/31/15