Decision-Making Process

Implementation

Cost-effective portfolio implementation is vital to our investment process. Our trading is based strictly on best execution and aims to minimize total transaction costs. We measure transaction costs as implementation shortfall — the difference between valuation price and execution price, including commissions (which approach 1¢ per share on average), spreads, market impact, and opportunity cost.

We capture actual trading results in our transaction-cost model to guide our selection of trading methods and venues. We utilize blind-strike package trading, active ECNs and passive crossing networks, as well as a well-screened roster of traditional agency broker/dealers. Our transaction-cost model also informs our rebalancing effort: realistic, empirically derived, stock-specific estimates of cost help us assess purchases and sales. Annual turnover ranges from 30% to 200%, depending on the strategy. Soft dollars are never used.