We agree with legendary value investor Benjamin Graham that, in the long term, markets are "weighing machines" and asset prices will weigh the fundamentals. However, we also recognize that the short-to-medium term markets are often "voting machines" and that, as John Maynard Keynes observed, "the markets can remain irrational longer than you or I can remain solvent." We therefore believe that a successful investment philosophy must combine both the "weighing" machine (Value) with the "voting" machine (Momentum).

Value drives our long term asset allocation strategy. We believe that the price that you pay for an asset class is the most important determinant of the returns you should expect to receive. Accordingly, our long term allocation strategy emphasizes asset classes trading at below average prices relative to historical norms.

This long-term strategy is then modified with tactical tilts designed to accommodate current market trends, putting greater weight on asset classes that have positive momentum. In other words, our asset allocation strategy seeks to combine our judgment of value with our sense of momentum, making our largest bets when our evaluation of value and momentum are aligned.