Diversity
One of the universally accepted principles of successful investing holds that diversification among portfolio holdings is the optimal practice to mitigate risk. Based on our long experience in this area, we believe there is a parallel path in choosing managers, which can accomplish similarly successful outcomes.
We have found that there is a relatively undiscovered segment of the investment community which has produced extraordinarily successful results. This group, our diversity managers, is made up of women and minority-owned investment firms, and we have successfully used this market segment for the past 18 years, Our experience goes back to 1990 when we teamed with Bankers Trust Corporation to offer a commingled fund, the Minority Equity Trust (“MET”). Several years later, while at our predecessor firm, a large corporate pension fund spun out of this trust, and followed our team when we founded MAXAM Capital. This product is currently comprised of eight minority and women advisers.
There is a long-held belief in the investment community that to promote social diversity one must give up alpha. We have found this to be untrue and are proud to say that MAXAM’s selected minority and women-owned managers have, as a group, outperformed each of their benchmarks since each product’s inception date. Shown below are our multi-manager diversity products. Our longest running product, the Minority Equity Trust has outpaced its benchmark, the Standard and Poor’s 500, over all rolling periods for the past 10 years. Our most recent composite, the All Cap Product, funded in March 2007, is benchmarked against the Russell 3000 Index, representing the broad equity markets. It too has outperformed its benchmark.
Disclosures: (i) The performance shown above are actual returns gross and net of fees based on the Minority Equity Trust Composite and the All Cap Composite. Gross performance data herein does not reflect the deduction of asset management fees. Net results are net of all investment management fees charged. (ii) actual investment advisory fees incurred by clients may vary. (iii) Information on the Minority Equity Trust Composite is the actual performance of a separate account, multi-manager portfolio that has been under advisement by the senior professionals of MAXAM since 2006 and before that at their predecessor firm since1994. (iv) MAXAM does not exercise investment discretion with respect to the Minority Equity Trust Composite. MAXAM makes recommendations with respect to appointing or terminating a manager, as well as suggested amounts to allocate to managers, to a committee which then votes as to whether to accept MAXAM’s recommendations. (v) Past Performance is not indicative of future returns.
The Standard & Poor’s 500 Index ("S&P 500") is a widely recognized, unmanaged index of market activity based upon the aggregate performance of a selected portfolio of publicly traded common stocks including monthly adjustments to reflect the reinvestment of dividends and other distributions. The S&P 500 reflects the total return of securities comprising the index, including changes in market prices as well as accrued investment income, which is presumed to be reinvested. These results are shown to give a perspective of the historical performance of the US equity market.
Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. As of December 31, 2007, the average market capitalization was approximately $89.9 billion; the median market capitalization was approximately $1.1 billion. The index had a total market capitalization range of approximately $527.8 billion to $27 million.
Past performance is not indicative of future returns.