Investment Strategy

KKWM believes that Modern Portfolio Theory (MPT) and Structured Asset Class Investing is the best way for us to develop prudent, long-term portfolios for our clients. The world's leading academic economists (including Nobel Laureate Merton Miller, Eugene Fama and Kenneth French) conducted extensive research, demonstrating that asset class selection (such as US large growth or international small value) — not stock selection or market timing — is the most important determinant of portfolio performance. Further, the founders of MPT received a Nobel-prize for revealing these four tenets:

1. Markets process information efficiently.
2. Over time, riskier assets provide higher returns as compensation to investors for accepting greater risk.
3. Adding high-risk asset classes to a portfolio may actually reduce volatility and increase return.
4. Structured asset class fund portfolios can be designed to, over time, deliver the highest expected return for a chosen level of risk.

Dimensional Fund Advisors, our major fund manager, is unique in its implementation of MPT into an entire diversified family of mutual funds. Each of its funds captures the return behavior of entire asset class, letting us accurately diversify clients’ investments across multiple asset classes — precisely incorporating the level of risk with which each investor is comfortable. Other advantages of this approach include:

• Lower costs — Structured asset class funds traditionally have lower operating expenses than do comparable actively managed funds.
• Greater tax efficiency — Structured asset class funds have relatively low turnover, so less of your annual return is consumed by taxes.

The asset class data used in our strategies has existed for up to 70 years. Had investors been able to follow our investment strategies over this period, their performance would have exceeded the major index benchmarks for both financial returns and portfolio risk reduction.

While we continue to study the current research of the leading academic economists to develop and enhance our investment strategies, the above findings form the basis of our investment philosophy.

In short, we build for our clients structurally managed asset class portfolios that minimize portfolio turnover, capital gains taxes and transaction expenses. In addition, we help you maximize risk reduction benefits by diversifying investments across domestic, international and emerging markets.