Equity mutual funds of all shapes and sizes tend to have one thing in common. Greater than 95% of equity mutual funds are managed by an individual Portfolio Manager or Investment Committee and would be considered “actively” managed. The remaining majority of funds would be considered “passively” managed index funds. An index fund uses the same representative portfolio as the published index it seeks to replicate. The majority of equity indexes that are published are weighted by market capitalization (the market price of a stock times shares outstanding). Market capitalization weighted indexes differ only by their universe selection. By gate-keeping an index universe, committees responsible for an index exclude certain component equities from their sample to maintain a predetermined portfolio characteristic of price/earnings ratio and price to book ratio. Our invention, The Industry Leaders Strategy Model was developed to generate portfolios based on the same universe, but using different ingredients to determine the weightings. Our process creates portfolios that have different portfolio statistics that are determined by the weighting factor and not a predetermined outcome. We developed a unique methodology for weighting portfolios by different fundamental inputs.
There are a small number of proprietary “model” based mutual funds that because of their secretive nature are as variegated as the actively managed funds. This invention has the same goal as these proprietary models (to be differentiated from actively managed funds by association to a discipline), yet this invention attempts to use a rigid and unique methodology to achieve the creation of understandably allocated portfolios.