The goal of our funds is to maximize investor returns while controlling risk. We do not hedge our bets, as that would reduce our overall returns. We also avoid the kinds of investments that have the potential for catastrophic loss. The result is superior returns with occasional drawdowns.

Our underlying investment philosophy is based on Behavioral Finance. This is an approach to investing which focuses on understanding and measuring how people actually behave as they make their investment decisions. Our approach is not to determine what stocks are undervalued, but to determine what stocks people think are likely to appreciate.

The rules that come from this analysis are based on common sense and a real-world observation of markets in action. These rules include aspects of both fundamental and technical investing as well as psychology. None of the rules we use would be surprising to a sophisticated and experienced investor.

We apply these rules to every stock in the fund's market every night. Before the markets open we have developed our conclusions as to which positions, if any, should be adjusted. The orders are then reviewed by us for common sense then executed manually. We will typically over-ride the model only once every four or five months.

A computer-based Expert System is similar in architecture to the computer systems that monitor and control an oil refinery or a large power plant. An Expert System, by definition, takes a set of rules created by human experts and applies them without emotion or bias to the data at hand. The work that our Expert System does every morning would take many months, even years, to do by hand.

To control the risks of our funds, we constrain our investing in the following ways:

• We use a long-only strategy, investing only in stocks listed on a major exchange. These funds do not use leverage, short selling, or derivatives of any form.
• We have well defined liquidity constraints.
• We avoid concentration in individual securities and sectors.

This process usually results in two to four trades a week per fund. We hold a position on average for five or six months. Trading increases, sometimes dramatically, during periods of market turmoil or during earnings season; trading decreases during periods of market calm.

Although we aim to be fully invested, we will hold cash rather than invest in a stock we don’t believe has an excellent chance to increase in value, or during short periods of extreme volatility.

Our quantitative, algorithmic approach ensures that our investment strategy always remains disciplined, focused, and unemotional. The results speak for themselves.