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Year-End Update On Portfolio Manager Changes

BigBankMoneyWe made four important portfolio changes in 2015.  We have discussed these changes with many clients, but we thought a year-end summary would be helpful for many of you.

  1. In portfolios where we did not have a lot of capital gains, we consolidated our three DFA equity funds–DFA International Core Equity (DFIEX), Emerging Markets Core Equity (DFCEX), and U.S. Core Equity II (DFQTX)–into one global equity fund, DFA Selectively Hedged Global Equity (DSHGX). The new fund holds virtually the same stocks with the same country weightings as our current mix of three funds. The benefit to you is that this will help reduce rebalancing costs and trading fees.
  2. We replaced the Seneca Global Limited Partnership and Natixis ASG Managed Futures Strategy Fund (ASFYX) with a mutual fund equivalent of the Seneca LP called Steben Managed Futures Strategy Fund (SKLIX). The benefits of this change include eliminating Seneca’s paperwork to buy or sell shares and for K-1 tax documents, as well as increased diversification because Steben uses multiple managed futures trading programs rather than Natixis’ single manager approach.
  3. We replaced several managers (Caldwell & Orkin, Mainstay Marketfield, and Merger) in the Absolute Return asset class with AQR Style Premia Alternative I and increased our weighting to Ironclad Managed Risk. The benefits of this change include added diversification and lower correlation to traditional investments. More can be read about this decision in a previous Client Connection blog post dated October 1, 2015.
  4. To comply with new SEC regulations, increase our operational efficiencies, and allow the best execution, we went to allocating the investments of accounts not held at TD Ameritrade (401ks, profit sharing plans, TSP’s, 457s, supplemental retirement plans, variable annuities, etc.) separately from those held at TD.  This means we will no longer combine the asset allocation of these “held-away” accounts with your funds at TD (this is called “house holding”).  Instead, we invest them as stand-alone accounts, that is as if they were the only asset you owned.

In 2016, we see a likely move from using two high yield bond funds to only one. It appears that the correlation of the two funds we currently use is very high, which negates any meaningful diversification benefits of having two funds. The benefit to you would be reduced rebalancing costs and trading fees.

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