FundAdvisor - Building Wealth & Earning s portfolio construction process is designed to balance...

One James Center901 East Cary Street, Suite 1100Richmond, VA 23219(888) 285-1863

Davenport & Company LLCMember NYSE l FINRA l SIPC

Building diversified portfolios of high-quality mutual funds

FundAdvisor

II

FundAdvisor offers investors a solution to navigating the ever-expanding world of asset classes and mutual funds available today. The program provides professional money management through globally diversified portfolios designed to keep you on track to meeting your long-term investment goals.

Strategic Portfolios

Expected Risk >

MAXIMUM GROWTH

GROWTH

CONSERVATIVEGROWTH

BALANCED

CONSERVATIVEBALANCED

Fixed Income & Cash Equivalents

Exp

ecte

d R

etur

n >

Equities

FundAdvisor

FundAdvisor offers five strategic portfolios based on a progressive scale of expected risk and return, so your portfolio is managed according to your specific risk tolerance and time horizon.

1

“The only investors who shouldn’t diversify are those who are

RIGHT 100% OF THE TIME.” — John Templeton, Fund Pioneer & Founder of Templeton Growth Fund, Ltd.

Our Approach

Davenport Asset Management

We are long-term investors and seek to deliver consistent returns while managing risk. FundAdvisor’s portfolio construction process is designed to balance these two objectives by providing globally-diversified portfolios of best-in-class mutual funds using a highly disciplined investment approach.

How We Build Portfolios:

1 Broad Market Exposure

Disciplined Approach

Asset Allocation

Fund Selection

2

3

4

2

Diversification Matters

FundAdvisor

Source: Morningstar Direct (Data as of 6/30/2015)

Diversified Portfolio represented by an equal weighting of the following indices: Large Cap Stocks represented by the S&P 500 Index, which is comprised of 500 U.S. stocks and is an indicator of the performance of the overall U.S. stock market. Mid Cap Stocks represented by the Russell Midcap Index, which measures the performance of the 800 smallest companies in the Russell 1000, which represent approximately 25% of the total market capitalization of the Russell 1000. Small Cap Stocks represented by the Russell 2000 Index, which measures the performance of the 2,000 smallest companies in the Russell 3000 Index. International Stocks represented by the MSCI EAFE (Morgan Stanley Capital International Europe, Australia and Far East) Index, an unmanaged index composed of the stocks of about 1,000 companies traded on 20 stock exchanges from around the world, excluding the U.S., Canada, and Latin America. Emerging Market Stocks represented by the MSCI EM (Morgan Stanley Capital International Emerging Markets) Index, a capitalization-weighted index of stocks from 26 emerging markets that only includes issues that may be traded by foreign investors. Corporate Bonds represented by the Barclays Capital U.S. Credit Investment Grade Bond Index, which represents primarily investment-grade corporate bonds within the Barclays Capital U.S. Aggregate Bond Index. Government Bonds represented by the Barclays Capital U.S. Government Index, which is an unmanaged index considered representative of fixed-income obligations issued by the U.S. Treasury, government agencies and quasi-federal corporations. Cash represented by the Citigroup 3-Month T-bill Index, which measures the return equivalent of yield averages that are not marked to market, and consists of the last three three-month Treasury bill month-end rates, calculated on a monthly basis.

Diversification does not guarantee a profit or protect against a loss. Performance shown represents past performance. Past performance is no guarantee of future results. The index returns reflect equities priced in U.S. dollars and do not include the effects of reinvested dividends. Investors cannot invest in these indices, and their returns are not indicative of the performance of any specific investment. Risk Considerations: Investing in securities carries risk including the possible loss of principal. Funds that invest in foreign securities may involve greater risks, including political and economic uncertainties, as well as risk of currency fluctuations. Small and mid cap company stocks may be more volatile than stocks of larger, more established companies. Investments in bonds and other fixed-income securities may fall in value if interest rates change. Generally, the prices of debt securities rise when interest rates fall, while their prices fall when interest rates rise. Longer-term debt securities are usually more sensitive to interest rate changes. An issuer suffering an adverse change in its financial condition could see the credit quality of its securities deteriorate, leading to greater price volatility of the security. Funds investing in lower-quality debt securities are more susceptible to these problems and their value may be more volatile.

Broad market diversification is a key component of effective asset allocation. As the table below illustrates, predicting the top performing asset class each year can be a challenge. Strategic global diversification can position your portfolio to benefit from the top performing asset classes while minimizing the effect of those areas of underperformance. As shown below, the Diversified Portfolio has witnessed consistent performance over the last decade.

Annual Returns by Asset Class

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015

Emerg. Mkts34.00%

Emerg. Mkts32.14%

Emerg. Mkts39.42%

Govt. Bonds12.39%

Emerg. Mkts78.51%

Small Cap26.85%

Govt. Bonds9.02%

Emerg. Mkts18.22%

Small Cap38.82%

Large Cap13.69%

International5.52%

International13.54%

International26.34%

International11.17%

Cash1.80%

Mid Cap40.48%

Mid Cap25.48%

Corp. Bonds8.15%

International17.32%

Mid Cap34.76%

Mid Cap13.22%

Small Cap4.75%

Mid Cap12.65%

Small Cap18.37%

Diversified Portfolio9.76%

Corp. Bonds-4.94%

International31.78%

Emerg. Mkts18.88%

Large Cap2.11%

Mid Cap17.28%

Large Cap32.39%

Corp. Bonds7.46%

Emerg. Mkts2.95%


Large Cap15.79%

Govt. Bonds8.66%

Diversified Portfolio-24.96%


Large Cap15.06%

Cash0.08%

Small Cap16.35%

International22.78%

Govt. Bonds4.92%

Mid Cap2.35%

Large Cap4.91%

Mid Cap15.26%

Mid Cap5.60%

Small Cap-33.79%

Small Cap27.17%


Mid Cap-1.55%

Large Cap16.00%


Small Cap4.89%


Small Cap4.55%


Large Cap5.49%

Large Cap-37.00%

Large Cap26.46%

Corp. Bonds9.00%

Diversified Portfolio-2.12%


Cash0.05%


Large Cap1.23%

Cash3.00%

Cash4.76%

Cash4.74%

Mid Cap-41.46%

Corp. Bonds18.68%

International7.75%

Small Cap-4.18%

Corp. Bonds9.82%

Corp. Bonds-1.53%

Cash0.03%

Govt. Bonds0.08%

Govt. Bonds2.65%

Corp. Bonds4.30%

Corp. Bonds4.56%

International-43.38%

Cash0.16%

Govt. Bonds5.52%

International-12.14%

Govt. Bonds2.02%

Govt. Bonds-2.60%

Emerg. Mkts-2.19%

Cash0.01%

Corp. Bonds1.68%

Govt. Bonds3.48%

Small Cap-1.57%

Emerg. Mkts-53.33%

Govt. Bonds-2.20%

Cash0.13%

Emerg. Mkts-18.42%

Cash0.07%

Emerg. Mkts-2.60%

International-4.90%

Corp. Bonds-0.92%

3

DisciplineWe believe discipline is the most difficult thing for investors to maintain.

We designed FundAdvisor with that in mind.


Helping you avoid emotional investingEmotional investing can lead to chasing performance — buying what has already posted strong gains — which can be detrimental to long-term returns because it is the opposite of buying low and selling high. FundAdvisor is managed using our proprietary selection and monitoring process — a disciplined approach designed to remove the emotional component of investing and avoid chasing performance.

The best funds are not always the best performersThe FundAdvisor models are designed to maintain diversified asset allocation over the long term. However, we know that even the best fund managers will go through periods of underperformance. Therefore, our rigorous selection and monitoring process is designed to keep focus on our highest conviction managers, keeping us from giving up on them at the wrong time. Our investment discipline focuses on long-term results and minimizes the impact of short-term underperformance on manager selection.

RebalancingEach portfolio is rebalanced annually to ensure that it continues to reflect your risk profile, helping you stay focused on your long-term objectives. This annual rebalancing has proven to add value over time by reducing positions that recently outperformed and increasing positions we believe are poised for future outperformance.

“There are two kinds of forecasters: those who don’t know, and those who

DON’T KNOW THEY DON’T KNOW.”

— John Kenneth Galbraith, Economist

4

BONDS

INTE

RN

ATI

ON

AL

DO

ME

ST

IC

INT

ER

M. T

ER

M

SH

OR

T T

ER

M

GO

VE

RN

ME

NT

ASSET CLASS UNIVERSE

Asset AllocationAsset allocation is the primary determinant of an investment portfolio’s risk profile and return potential. We utilize our proprietary asset allocation methodology to generate strategic portfolios based on our analysis of underlying asset classes. This discipline also incorporates flexibility — adjustments to allocation are made according to changes in long-term global trends, market cycles and valuations. This process is designed to shift assets from overvalued, outperforming asset classes into areas of value and opportunity — driving returns over time.

Asset allocation does not guarantee a profit or protect against a loss.

Asset Class Progression

FundAdvisor

STOCKS

DOMESTIC INTERNATIONAL

EMERGINGMARKETS

LARGECAP

MIDCAP

SMALLCAP

DEVELOPEDMARKETS

VS.

VS.

GEOGRAPHY:

SIZE: RISK:

QUALITY DURATION GEOGRAPHY

CO

RP

OR

AT

E

5

Selection & MonitoringFour Levels of Analysis for Fund Selection

We conduct quarterly due diligence on the fund managers in the FundAdvisor program by applying a set of rigorous quantitative and qualitative “watch list” screens. The goal of this quarterly monitoring process is to ensure that the managers continue to meet our strict criteria. If a fund manager consistently or egregiously violates one or more of the following criteria, a recommendation may be made to remove the fund from FundAdvisor:

We use a proprietary screening process to identify best-in-class fund managers that have outperformed peers and benchmarks over the long term while taking less risk.

1. Quantitative Analysis Have they had consistent performance?

Assessing performance including absolute, risk and risk-adjusted returns over rolling periods relative to peers and benchmarks. Examining volatility and manager tenure.

2. Style Analysis Have they invested the way they say they have?

Assessing style, including holdings-based and performance-based style analysis. This gives us a better sense for the source of historical returns and expected behavior of a fund.

4. Interviews & Evaluation Who’s making the decisions?

Interviewing managers and conducting due diligence. Also, evaluating existing literature, including the prospectus, statements of additional information and available reports.


Monitoring

• Underperformance on an absolute or risk-adjusted basis

• Changes in the fund manager’s investment philosophy, strategy or objectives

• Style drift

• Changes in the fund manager’s key personnel

• Regulatory or legal proceedings or investigations

3. Qualitative AnalysisHow do they do it?

Evaluating a manager’s process — including philosophy, strategy, experience, research and discipline — and identifying the key decision makers

6

Maximum GrowthFocused on equities, this model is designed to produce maximum long-term capital appreciation and is most appropriate for investors with an extremely high tolerance for risk and a long-term time horizon (10+ years).

FUND ALLOCATION

American Funds AMCAP F2 15%

Diamond Hill Large Cap I 15%

FMI Large Cap 16%

Victory Munder Mid Cap Core Growth Y 10%

Vanguard Mid Cap Index Adm 10%

JHancock Small Cap Value I 5%

MFS International New Discovery I 7%

FMI International 8%

Dodge & Cox International Stock 7%

American Funds New World F2 5%

Money Market 2%

Equity 98% / Fixed Income 0% / Cash 2%

GrowthFocused on equities, this model is designed to produce long-term growth of capital and is most appropriate for investors with a high tolerance for risk and a long-term time horizon (10+ years).

FundAdvisor offers five strategic models focused on relatively consistent long-term asset allocations. The strategic models are diversified through “traditional” asset classes, such as large cap, mid cap, small cap, international and emerging markets, short- and intermediate-term bonds, and cash. Allocations among asset classes are adjusted to reflect current market conditions.

Asset Allocation and Diversification do not guarantee a profit or protect against a loss. Please see the Disclosures section for important information.

Strategic Models

FUND ALLOCATION



FMI Large Cap 10%








Money Market 2%


Allocation by Asset Class: 2% Cash

29% Large Cap

33% Small & Mid Cap

36% Int’l & Emerging Mkts.

2% Cash

46% Large Cap

25% Small & Mid Cap


Expected Risk >

MAXIMUM GROWTH

GROWTH

CONSERVATIVE GROWTH

BALANCED

CONSERVATIVE BALANCED

Fixed Income & Cash Equivalents

Exp

ecte

d R

etur

n >

Equities

Allocation by Asset Class:

FundAdvisor

7

Conservative GrowthThis model is balanced between equities and fixed-income securities, but tilted toward equities. Emphasizing growth over income, this model is most appropriate for investors seeking long-term growth, with a time horizon of 10+ years and a fairly high tolerance for short-term risk.

BalancedBalanced between equities and fixed-income securities, this model is designed to produce both current income and capital growth with moderate investment risk. This model is most appropriate for investors who require a moderate level of income, seek long-term capital growth (0-10 years) and have a moderate risk tolerance.

2% Cash

38% Large Cap

20% Small & Mid Cap


18% Fixed Income

Conservative BalancedBalanced between equities and fixed income, this model is tilted toward fixed-income securities, with a moderate allocation to equities. This model is designed to provide moderate current income and some capital growth over a longer time horizon (0-10 years), and is most appropriate for investors with a moderate risk tolerance.

2% Cash

37% Fixed Income

30% Large Cap

15% Small & Mid Cap16% Int’l &

Emerging Mkts.

2% Cash

59% Fixed Income

18% Large Cap


10% Small & Mid Cap



Allocation by Asset Class:FUND ALLOCATION



FMI Large Cap 10%








Eaton Vance Global Macro Absolute Return I 9%

Hartford Floating Rate I 9%

Vanguard Short-Term Investment-Grade Inv 19%

Money Market 2%


FUND ALLOCATION



FMI Large Cap 13%











Money Market 2%


FUND ALLOCATION



FMI Large Cap 6%









Vanguard Interm-Term Investment-Grade Adm 19%


Money Market 2%

Equity 39% / Fixed Income 59% / Cash 2%Asset Allocation and Diversification do not guarantee a profit or protect against a loss. Please see the Disclosures section for important information.


8

FundAdvisor

Important DisclosuresHoldings shown as of 6/30/2015.

FundAdvisor Description and Model Definitions: The Davenport FundAdvisor (“FundAdvisor”) strategy is based on the long-term growth of capital through investment in one of five diversified portfolios of mutual funds, each differentiated by investment objective and risk and return characteristics. Maximum Growth is the most aggressive FundAdvisor model, invested primarily in equity mutual funds with considerable positions in more volatile asset classes. Growth is the second most aggressive FundAdvisor model, invested primarily in equity mutual funds with a majority weighting in more conservative equity asset classes. Conservative Growth is the third most conservative FundAdvisor model, invested in equity mutual funds and, to a lesser degree, fixed-income mutual funds. Balanced is the second most conservative FundAdvisor model, invested in equity mutual funds, with considerable exposure to fixed-income mutual funds. Conservative Balanced is the most conservative FundAdvisor model, with the majority of the portfolio invested in fixed-income mutual funds and a lesser percentage in equity mutual funds.

Diversification does not guarantee a profit or protect against a loss. Past performance is no guarantee of future results.

Important Risk Considerations: Investing in securities carries risk including the possible loss of principal. Funds that invest in foreign securities may involve greater risks, including political and economic uncertainties, as well as risk of currency fluctuations. Small and mid cap company stocks may be more volatile than stocks of larger, more established companies. Investments in bonds and other fixed-income securities may fall in value if interest rates change. Generally, the prices of debt securities rise when interest rates fall, while their prices fall when interest rates rise. Longer-term debt securities are usually more sensitive to interest rate changes. An issuer suffering an adverse change in its financial condition could see the credit quality of its securities deteriorate, leading to greater price volatility of the security. Funds investing in lower-quality debt securities are more susceptible to these problems and their value may be more volatile.

Annual Fees: 1.25% of the first $1 million or portion thereof in market value 1.00% of the next $4 million in market value 0.75% of the market value above $5 million Minimum fee of $125 per quarterAccount Minimums: Strategic Models: $35,000

In some instances, fees and account minimums may be negotiated. The wrap fee reflects a fee for investment advisory services, custody of assets and execution services, and is generally a percentage of assets under management.

You should consider each mutual fund’s investment objectives, risks, charges and expenses carefully before investing. Each mutual fund’s prospectus contains this and other important information, should be read carefully before investing or sending money, and can be obtained by contacting your Investment Executive or by calling (800) 853-2060.

Davenport Asset Management claims compliance with Global Investment Performance Standards (GIPS®). To receive a complete list and description of Davenport Asset Management’s composites and/or a presentation that adheres to the GIPS® standards, call Davenport Asset Management at (800) 846-6666 or write to: P.O. Box 85678, Richmond, VA 23285-5678.

The information contained herein is based upon data obtained from sources believed to be reliable. Such data is not guaranteed as to its accuracy or completeness and is for informational purposes only. Portfolio holdings are subject to change on a daily basis without prior notice.

Davenport Manager ResearchDavenport’s Manager Research Team is dedicated to conducting research and analysis on third-party money managers and domestic and global asset classes. The Team uses allocation modeling and proprietary methodology to construct diversified portfolios managed according to the specific risk tolerance and investment goals of each client.

Davenport Manager Research is responsible for the daily management and monitoring of the FundAdvisor portfolios. Management of the FundAdvisor portfolios is overseen by Davenport’s Investment Policy Committee.

Contact your Investment Executive to learn more about the investment resources available through Davenport Manager Research.

III

For more information on Davenport’s FundAdvisor Program, contact your

Investment Executive or call (800) 846-6666

Date post:	30-Mar-2018
Category:	Documents
Upload:	dothuan
View:	214 times
Download:	1 times

FundAdvisor - Building Wealth & Earning s portfolio construction process is designed to balance...

Documents