Minuteman Asset Management

1
Minuteman Asset Management

• Standing guard over your portfolio?

2
Management You Can Rely On

• Other advisors provide you with little more than
  a financial road map. The Minuteman Asset
  Management program stands guard, watching your
  portfolio.
• Every minute of the trading day your portfolio is
  monitored for asset class expansion and
  contractions.
• If an asset class grows or shrink beyond
  acceptable tolerances, the Minuteman rebalances
  your portfolio.
• This ensures that the risk of your portfolio
  remains at a level you are comfortable with.

3
Asset Allocation is the Greatest Determinant of
Portfolio Performance
Research Analyzes what Contributes to Portfolio
Returns In a ground breaking study of 91 large
pension funds, Gary P. Brinson, Randolph Hood,
and Gilbert L. Beebower measure annual returns
over a 10 year period.
4
Asset Allocation Importance (contd)
In a ground breaking study of 91 large pension
funds, Gary P. Brinson, Randolph Hood, and
Gilbert L. Beebower measure annual returns over a
10 year period. The table below illustrates the
findings
The table above demonstrates that the addition of
active management techniques such as market
timing and security selection to a portfolio,
decreases returns and increase risk. The chart
below demonstrates the amount of portfolio
performance is attributed to Asset Allocation,
Market Timing, Security Selection and Other. The
results show that Asset Allocation is the most
important determiner of portfolio returns.
5
Rebalancing Why?
Rebalancingbringing a portfolios allocations
back into their intended proportionsensures that
you maintain your risk/reward profile.
Rebalancing simply means taking money from an
asset class that has performed well and
reinvesting it into one that has lagged, a
practice which follows the sage financial advice
to Buy low, sell high.
Stocks are represented by the SP 500, bonds by
the Lehman Aggregate Bond Index. Source
Compustat, Lehman Bros., and Bernstein. Online
Report URL
6
Rebalancing How

• End of the day Rebalancing is usually executed
  through buying and selling shares of mutual
  funds, once daily.

• Immediate The Minuteman Asset Management program
  advocates the use of Exchange Traded Funds (ETF)
  so that when the Minuteman sees a rebalancing
  need, it can be executed immediately.

7
Rebalancing When?

• Is it better to rebalance your portfolio
• Monthly?
• Quarterly?
• Semi-Annually?
• Annually?

One thing for certain is that all the rebalancing
options above ignore what is happening to your
portfolio in-between the rebalancing intervals.
Is this acceptable? No!
8
Rebalancing When?

• The optimal method of rebalancing is based on
  asset class variance.
• Study conducted by a group at MIT (Massachusetts
  Institute of Technology)
• This variance-based rebalancing can reduce risk
  and increase returns.
• Study conducted by the Bernstein Institute

MIT Working Paper
Bernstein Institute Paper
9
A Hidden Mutual Fund Risk

• Manager Performance
• Selecting an actively-managed mutual fund based
  on its historical performance ignores that the
  mutual fund manager may underperform in the
  future.
• If the portfolio manager did underperform, would
  you look to exit the mutual fund?
• If your answer is yes, then you might fall into a
  bad cycle of buying high and selling low!

10
Past Success Future Trouble?

• Some financial advisors recommend portfolios that
  include mutual funds which have the highest
  historical performance, but is that the best way
  to choose?
• Mutual funds go through cycles. What confidence
  do you have that the fund manager will have
  enough superior investment ideas to meet the
  needs of the new money?

11
Index Invest with Confidence
approximately 80 of mutual funds underperform
the stock market's returns in a typical
year. - Bill Barker, Senior Producer of
Investing, The Motley Fool
Since 1984the SP 500 Indexprovided a 16.3
return. The average equity mutual fund turned in
a return of 13.1 3.2 percentage points
less - Remarks by John C. Bogle, November 15,
2001 Founder and Former Chairman, The
Vanguard Group (Return data are through
10/1/2001)
12
The Minuteman at Work for You

• Throughout the day, we monitor your portfolio for
  any asset class deviation eliminating excessive
  risk.
• If your portfolio become skewed (beyond
  acceptable tolerances) as markets ebb and flow,
  it is immediately rebalanced.

13
About Exchange Traded Funds

• Exchange Traded Funds (ETFs) provide real time
  access to indexed investments.
• Exchange Traded Funds are less expensive than
  their Mutual Fund counterparts.

14
Minuteman Has It All
Consult your investment professional today to
learn how to get Minuteman Asset Management
standing guard for you.