Tuesday, February 25, 2014

A Pie For All Seasons

I’ve never met an American who doesn’t like at least one kind of pie. So many delicious crusts, cream fillings and meringues to choose from; but for me a pie is all about the fruit filling. Apples, peaches, cherries, blueberries, blackberries and any other delicious fruit that can be stuffed into a pie all have their seasons and climates in which they thrive and produce the best results for pie. Unfortunately, I have not discovered a year round, all season, and all climate fruit that makes a delicious pie. I’ve often thought about creating a “Frankenpie” with a different fruit in each slice but I imagine the results wouldn’t match the dream. I’m sure they don’t call it “Frankenpie” but the primary mutual fund company we work with applies this approach to portfolio management. During a recent meeting with the portfolio manager, he described how the company slices up management of their funds between 3 to 12 different managers per fund. These managers are responsible for their own slices and manage them based on their own style, experiences, convictions, strengths and weaknesses. The result is portfolios that are as naturally diversified as any group of individuals would be and structured to be complementary so that one manager’s weakness in a given investment climate is countered to some extent by another manager’s strength in that same climate. Over time, this approach provides a fund the ability to generate more stable returns in an ever-changing market place. This portfolio management theory is in essence management for all seasons.