Portfolio Construction
As we believe our approach to security selection contributes to limiting downside risk, we are willing to concentrate our investments; our accounts are not diversified in accordance with the S&P 500. Given the volatility and rotation of the capital markets in recent years however, we believe diversification is essential. A typical commitment within our portfolios is 2%-5% of an account's assets. Our internal research effort, which involves partners, portfolio managers and analysts, begins with a "bottom up" approach. The group dynamics involved in the evaluation of potential investments and current holdings results in substantial commonality across accounts while still permitting portfolios to reflect a portfolio manager's investment preferences. Each portfolio manager has primary responsibility for and knowledge of a group of clients and thus has a better understanding of their risk/reward sensitivity.