Rosetta Financial :: Asset Management Process


	Our investment research is driven by our need to review, select and closely monitor a small group of outstanding mutual funds from the more than 20,000 funds available today. It is because of our intense research focus that we have been able to consistently identify and recommend the best mutual funds to our clients.
	Proprietary Research Based on our investment experience and knowledge of market history, we have created a proprietary process to aid us in the critical task of mutual fund selection and management. This investment management process is one of the characteristics that make Rosetta Financial and our advisors unique. Our investment recommendations are based on our own research and analysis, not the opinions of some other organization, department or individual. The research and decision making process we use to determine the investments we recommend to our clients is a mostly scientific endeavor. However it does involve some art and intuition as well. The process begins with the construction of a master list of the best mutual funds available.

	The Master List Our master list is an evolving group of 40 to 50 mutual funds covering 15 distinct asset classes. Every investment dollar that we manage on a fee basis is invested in a customized portfolio consisting of funds from this master list. Rather than spread our clients’ collective investment assets over hundreds of mutual funds as some management firms do, we focus on only these 40 to 50 funds that have passed our rigorous screening process. This simple approach allows us to know these investments more intimately and monitor them more closely. And the simpler we can keep the management process, the more likely we are to be successful at it.
		The Screening Process The funds that appear on our approved master list had to first survive an initial screening process. In this first step we screen out the thousands of mutual funds that do not meet our minimum qualifications. From the universe of over 20,000 mutual funds, we screen out the following: Funds closed to new investments Funds with a track record less than 5 years Funds whose manager has been at the fund less than 4 years Funds with higher than average annual expenses Funds ranked in the bottom 40% of their asset class for the last 1, 3 and 5 years.
	This will usually produce a list of around 50 to 100 funds for each of our 15 distinct asset classes. Detailed data on these funds is then entered into our scoring system which assigns points for each of 17 different statistical variables that we believe are critical in identifying superior mutual funds. An individual score is then assigned to each mutual fund based on how that fund fares on the 17 variables that we measure. From there we take the 10 highest scoring funds and look at each one in more detail. This part of the process is more art than science. Our goal is to get a feel for each fund’s consistency, risk-return ratio, performance in up and down markets, etc. We then exclude funds from this list until we are left with the final one or two which we judge to be of the highest quality. Those funds are then added to our approved list for ongoing monitoring. This process is repeated for each of the 15 asset classes we use when managing our clients’ portfolios.
	Ongoing Monitoring and Analysis Although we are believers in the “buy-and-hold” philosophy of investment management, we do not let that translate into the “buy-and-forget” philosophy that plagues so many other financial advisors and investment firms. On a regular basis we submit each of the mutual funds on our master list to a separate analysis that looks at 15 potential problem areas. If one of our recommended funds is having issues among these 15 data points, the fund goes on a probationary watch list. If that fund manager can correct the issues within a reasonable amount of time, then the fund will not be replaced. Because even the best mutual funds go through rough patches, we do not want to be too hasty by replacing these funds immediately. We will usually give a fund on our watch list between 2 months and 1 year to correct itself, depending on the nature and severity of the problem as well as the track record of the fund. For instance, if a fund that typically ranks in the top 40% of its asset class goes three consecutive months ranked in the bottom 40%, that’s not a situation where we will immediately replace the fund. We will give that manager several months to correct the performance problems and at least get back into the top 50% of its asset class. On the other extreme, if a manager leaves a fund, if a fund starts to invest in things that it shouldn’t or if a fund’s expenses are dramatically increased, we will usually recommend an immediate replacement. Once we have identified a fund that needs to be replaced, we will usually replace it with another fund on our master list in the same asset class. Which fund we will recommend as the replacement will depend on each client’s situation, other holdings, investment time horizon, risk tolerance, etc.
	Communicating Changes When we have identified the appropriate replacement, each affected client is notified and our concerns are spelled out clearly. Our rationale for the change is explained as well as the costs and tax implications, if any, associated with the change. Only after our clients are fully informed of the situation and they have given their approval do we make the change. We view this process as another opportunity for us to communicate with our clients and it oftentimes serves as a reminder of why they hired us in the first place. We manage investments so our clients can enjoy life. back to top

	Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Rosetta Financial Advisors, Inc. are not affiliated.