1. Equity Sleeve 

We recognize that some equity markets are more efficient than others, and passive funds can be a great way to keep fees low and provide attractive beta exposure. For example, our research has shown that very few managers in the US Large Cap Equities space have demonstrated an ability to add value over time. As a result, we generally pursue a passive strategy with this market segment.

By contrast, Small/Mid Caps, International, and Emerging Markets are less efficient and benchmark exposure is not as compelling. If investors can tolerate periods of under-performance it makes sense to embrace active management (and pay the associated fees).

Diversification is critical. We use managers and strategies with differentiated yet complementary exposure across geography, market capitalization, styles, and orientations. We prefer top-tier (and often boutique/under the radar) active managers who are unafraid to deviate from their benchmark or what many others are doing. We also will include select managers with an unconstrained, global mandate who run high conviction/concentrated portfolios.

2. Fixed Income Sleeve 

The role of our Fixed Income Sleeve is to provide capital preservation and generate income. 

We are proponents of active management within Fixed Income, while being very mindful of fees. In contrast to U.S. Large Cap Equities, we think it is unwise to include passive strategies in Fixed Income because attractive opportunities can be found outside the benchmark, especially during volatile periods and market dislocations. Active managers can react and respond to these opportunities and mitigate risk such as interest rate/duration risk, credit risk, and sector risk (treasuries, mortgages, corporates, etc.).

3. Diversifying/Non-Correlated Sleeve

The primary objective of our Diversifying/Non-Correlated Sleeve is to generate returns that have little correlation with broader risky assets, namely stocks. Each manager/strategy offers a custom role and differentiated risk/return expectation. Some strategies will struggle in certain market conditions, which is why taking a portfolio approach is more important than focusing on a single line item performance. Fees tend to be higher relative to more traditional strategies, which can be tolerable if the manager is providing exposure that is not easy to replicate.

4. Opportunistic Sleeve 

This Sleeve takes advantage of timely investment opportunities and/or market dislocations that may not fit neatly into other Sleeves. It generally includes opportunities with higher potential returns along with higher levels of risk. The investment thesis and opportunities duration will vary while allowing for both tactical and secular opportunities. 

Examples of opportunistic investments include strategies that invest across the capital structure (stocks, bonds, etc.); sector-based funds; and niche strategies that are highly opportunistic. Where appropriate, Alternative Investments (such as private equity, private credit, and hedge funds) can also play a meaningful role in our Opportunistic sleeve.