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Fund managers often invest much of their personal wealth in their own funds. Having 'skin in the game' helps with investor buy-in and can also keep a fund afloat if performance dips. But, without proper diversification, those same managers can end up with the type of concentrated portfolios that they tell investors to avoid.
The Mason Companies a Reston, Virginia based $7 billion RIA has started working with fund managers to help them diversify their portfolios. "What we're doing is going through the overall portfolio and advising on how to improve diversity by investing a portion of a managers liquid wealth," explains Scott George, President, and CIO of The Mason Companies.
The Mason Companies has created a mutual fund selection methodology that looks at 15-16 asset categories and creates a custom blended portfolio with specific allocation targets. Once a portfolio is created, it is assessed every ten days for a potential rebalancing. The methodology allows for allocations to trend 30% above or below target before triggering a buy or sell signal. George explains that this approach can capture excess return in the market without meaningfully increasing risk. "Through our research, we've discovered that the 30 percent range is sort of a sweet spot," he says.
The methodology also takes a historical look at mutual fund families to understand the total overall performance of a fund group in addition to fund family exposures. By l...................... To view our full article Click here
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