INVESTMENT PHILOSOPHY

Investment Philosophy

The basic tenets of our investment philosophy are (1) preservation of capital, and (2) "real" growth of capital net of inflation with minimized volatility. We execute this philosophy through:

• Identifying investment managers who have demonstrated top-tier performance over prior market cycles, essentially with asymmetrical returns. They preserve capital in a market decline.
• Diversifying portfolios with US and international equities, absolute return investments, fixed income securities and other non-correlated investment classes.

Portfolio Design

KSM Capital Advisors utilizes a wide range of independent investment resources to supplement its own internal research. Our overall approach to portfolio design is discussed below:

• KSMCA manages high quality municipal and taxable bond portfolios with a focus on income. Bond managers or mutual funds are utilized for niche fixed income areas such as international and high yield.
• Equity management is sub-advised to top-tier investment managers with a proven specialty or "edge" in a particular asset class. Equity managers are identified through a quantitative and qualitative search process focused on each manager's risk-adjusted returns and ability to preserve and grow capital in different market environments.
• Alternative investment managers, such as hedge funds and private equity funds are selected for client portfolios using a similar process.

Management of Investment Process

Steps in Management of the Investment Process

Step 1: Analyze Current Position

Step 2: Design Optimal Portfolio

Step 3: Formalize Investment Policy

Step 4: Implement Policy

Step 5: Monitor, Supervise & Rebalance