NAAIM Newsletter By Will Hepburn January 25, 2010 Do You Know the NAAIM Number This Week? The NAAIM Survey of Manager Sentiment turned 3 years old last year and I took the opportunity to apply the three years of data we had developed to a more-active form of rebalancing that I call Adaptive Rebalancing. In October, Hepburn Capital published a study called Using Adaptive Rebalancing to

Why Active Management Makes a Difference written by: Will Hepburn Modern portfolio theory holds that the marketplace demands a higher rate of return from higher risk investments. This has proven true for the stock market, which has historically outperformed most other forms of investments, but at the cost of subjecting investors to greater volatility or risk. Risk is defined as the variability of an investment’s returns

Using Adaptive Rebalancing to Bridge the Gap between Strategic Asset Allocation and Tactical Asset Allocation William T. Hepburn October 2009 Download this study Quarterly Study Update Summary: This study introduces a method of periodic adjustments in stock and bond allocations to match current market conditions, the application of which is shown to dramatically lower risk and increase returns compared to buy and hold strategies. Making adjustments

Benefits of Active Management Benefits of Buy-and-Hold The Math of Losing It’s cheap Can work in both up and down markets It is easy to understand Active Managers must have greater skill It takes little effort Provides True Diversification Reduces manager error Adapts to Changing Markets Works well in rising markets Wall Street wants you to Buy and Hold Reduces contact with brokers The Brinson Study