In most of its proprietary portfolios, PMC acts as a “manager of managers”: identifying specialist money managers, mutual funds, or exchange-traded funds (ETFs) and combining them to form unique, value-added solutions designed for a broad range of investors. These proprietary solutions—which include mutual fund wrap portfolios, multi-manager accounts, and separate accounts blending manager models and ETF programs—are constructed using a multi-faceted approach. First and foremost, PMC will establish the strategic asset allocation against which the portfolio’s performance is assessed. These baseline allocations are derived from PMC’s capital markets assumptions and asset allocation process. Then, PMC portfolio management and research teams collaborate on the selection of separate accounts, mutual funds, and/or ETFs for the portfolio, taking into consideration overall portfolio objectives and operational factors such as investment minimums. Each portfolio follows one of three performance models:
Asset class representative. PMC’s portfolio managers select a specific manager to represent each asset class in a portfolio. For example, if a portfolio model requires a 25% allocation to large cap value, only a manager(s) categorized as large cap value is selected for that slice of the overall allocation. Each asset class in the portfolio is then filled by a manager or managers this way.
Sub-advised. Specialist sub-advisors are hired to manage certain PMC portfolios. Under this approach, sub-advisors that most closely align with portfolio objectives set by the PMC Investment Committee are screened and evaluated. After extensive due diligence, one or more are then selected to manage the portfolio. Sub-advisors we have selected to manage PMC portfolios include Innealta Capital, William Blair & Company, LLC, Neuberger Berman Fixed Income LLC, Schroder Investment Management North America Inc., Mellon Capital Management Corporation, Loomis, Sayles & Co., L.P., and Delaware Management Company.
Returns-based style analysis (RBSA). Using advanced optimization techniques, this approach involves analyzing returns of each of the underlying funds in a portfolio against the strategic asset allocation, determining the effective asset class exposures of each fund, and blends a weighted combination of the underlying funds to match the target asset allocation model. RBSA provides the opportunity to employ active mutual fund managers who do not fit neatly into a single style box category and pursue potentially profitable investment ideas outside that style box, while still allowing the portfolio manager to effectively control the overall asset class exposures and therefore the risk of the portfolio.