Financial markets reflect the current preferences of investors, yet investors rarely act unanimously or consistently. During different market conditions, they react to news in various ways, hold widely diverse opinions of how to value companies, and can become influenced by emotion -- all of which can create variations in market performance. For example, the price-to-earnings ratio may be a primary driver during one point in time, while earnings growth may be more influential at another.

We recognize that successful stocks share common characteristics, once one looks past temporary market effects. We know that only a broad set of factors that are measurable, based on sound economic reasoning and that are not correlated can explain performance of stocks within major economic segments over the long term. Listening to market reality with a common-sense blend of fundamental information, quantitative tools and qualitative insight enables our team to develop and set weights for a broad group of factors driving equity returns. Factor weights are set within each major economic segment of the market, based on expected contribution to excess return. This dynamic weighting enhances the explanatory power of our analysis and has added incremental value to our client portfolios since the inception of our process.

Quantitative research and tools play an important role in our process - and we reinvest a significant amount of our revenue into their enhancement each year. Nevertheless, we know that while approaches which rely solely on quantitative techniques may be very efficient and effective, they cannot always capture the many nuances dictating a company's return or explain why investors prefer one stock to another with seemingly identical characteristics. Therefore, from the beginning, our approach has combined the best attributes of objective quantitative techniques followed by an in-depth qualitative review of a focused list of portfolio candidates.

Equally important, we manage all portfolios against a target benchmark, which generates a more consistent pattern of performance. To eliminate risks such as market timing and sector bias, our investment team constructs portfolios that are fully invested and track the sector weights of the target benchmark. This approach preserves the value of our stock-picking skill, while neutralizing unrewarded risks.