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Investment Philosophy

We believe that successful outcomes are a result of a disciplined approach:

  • Asset class exposure drives long-term investment returns
  • Diversification across asset classes can reduce downside risk and improve returns
  • Capital markets are mostly efficient and excessive investment costs can be eliminated
  • Rebalancing is a cornerstone of a disciplined process

Our Bucketing Approach

  • We use a bucketing approach (Equities, Diversifying Strategies, and US Investment Grade Bonds) to manage portfolios.
  • Each asset category has different drivers of investment returns and risks.
  • MCF builds each bucket and then allocates a percentage of assets to each bucket based on the client’s objective.


  • Description: Operating businesses with long-term capital growth potential
  • Investment Characteristics: Subject to high volatility due to cycle nature of economic factors
  • Common Market Indices: Dow Jones Industrial Average (“Dow”), S&P 500, MSCI EAFE (Europe, Far-East, and Asia), MSC Emerging Markets Index
  • Asset Category Examples: US and International Equities

U.S. Investment Grade Bonds

  • Description: Debt instruments with full economic stability, preservation of capital and high liquidity
  • Investment Characteristics: Low volatility, low correlation to equity risk, low credit risk
  • Common Market Indices : Bloomberg Barclays US Aggregate Bond, Bloomberg Barclays U.S. Government/Credit 1-3 Year, Bloomberg Barclays US Treasury
  • Asset Category Examples : US government bonds and high-quality US corporate bonds (BBB-rated or better)

Diversifying Strategy Investments

  • Description: Investments that tend to move independently of equities and US Investment Grade Bonds
  • Investment Characteristics: Potential for returns to exceed long-term inflation
  • Common Market Indices: Bloomberg Barclays Global Aggregate Bond ex USD, Bloomberg Commodity, Bloomberg Barclays High Yield
  • Asset Category Examples: International and High Yield Bonds, Commodities, Absolute/Real Return strategies, Private Equity, Private Debt, & Direct Real Estate

Market Efficiency Views


Efficient Market – prices reflect known information, low probability to outperform the index/benchmark

Inefficient Market – market anomalies exist, less coverage, potential to outperform exists

Passive Investing - attempt to match/replicate the index/benchmark

Active Investing – attempt to outperform the index/benchmark

Why Passive for Efficient? Generally low cos broad exposure, not worth paying higher fees for low probability of outperforming the index/benchmark

Why Active for Inefficient? Greater potential for out-performance, may reduce risk, but fees higher

Potential areas to mix A & P? In moderately efficient or less inefficient markets, mixing passive and active still provides broad market exposure but with a potential to outperform, while keeping costs low


Empirical Data - U.S. Large Cap Stocks

  • Large Cap U.S. Equity is believed to be highly efficient
  • Overall discrete periods analyzed, active management has been, at best, a coin flip. One out of every four managers has out-performed the benchmark (SP500 Index)
  • Rolling Analysis shows median performance topping out around 1%, but many periods show negative performance verses the benchmark
  • Evidence supports using a passive or risk mitigated strategies