Mr. Seitchik: Trillium Asset Management is a 27-year-old investment adviser. We are the oldest and largest independent investment adviser in the United States dedicated to socially responsible and sustainable investing. We have four offices, in Boston, San Francisco, Boise and Durham. Our clients come to us because they are interested in having professional investment advisory services, but also because they share in our mission of investing for a better world, which is our trademark slogan. Our mission has four components to it. One is on the product and service side, working with clients to fulfill not only their financial goals, but also their social and environmental goals. Our clients are individuals and high net worth families as well as institutional investors. We've also for the last 27 years been exploring and developing means of social and environmental progress that are offered by the capital markets, and we work to educate other concerned investors in their use. Again, our clients come to us for multiple objectives, both for money management and to make progress on the social and environmental goals that they have. Our mission also includes creating a just work environment that encourages personal development with broadly shared ownership and responsibilities. Lastly, we work in networks with other organizations and people to build a just society and a better world through the capital markets. That's at the core of who we are and what we do. At the peak of the markets, we had well over 1 billion in assets under management; we have a bit less now. Our investment approach begins by working with clients to develop a personalized investment policy statement. Each client ends up with an individual investment plan. This usually leads to a diversified balanced portfolio where the bulk of the assets are managed by us in US listed equities and US bonds. We can augment those investments with responsible alternatives managed by others. We use other managers for asset classes that we don't manage ourselves, including international equity, green real estate and venture capital where appropriate. We also have clients for whom we manage a piece of their broader portfolios. Typically this is an allocation from their consultant, family office or Investment Committee. In those cases we are often managing equity-only portfolios. We're very much portfolio managers, not stock pickers. I came to Trillium in 2004 from Deutsche Asset Management in London. As the Chief Investment Officer, I have been working with our team to continue to evolve and improve the investment process. We have an institutional quality investment process; we're very process driven and we have a very consistent approach to managing assets. We have a strong long-term track record in equities and have had excellent relative performance during the recent downturn. We've always benchmarked our portfolios against standard benchmarks such as the S&P 500. Although we are socially responsible managers, we hold ourselves accountable for how we're performing relative to the broad market, not to a socially screened or custom index. Our equity process has four pieces to it. The first is developing a list of approved stocks and that process is led by our investment analysts. We have investment analysts who are organized along sector lines and they bring to our Investment Management Committee, made up of our senior investment portfolio managers meeting on a weekly basis, recommendations of stocks to add to our approved list. All of our investments in stocks are coming off our approved list unless there is a client-specific reason to invest off that list. The stocks that are recommended by our analysts have gone through a rigorous process of both social and environmental analysis as well as financial due diligence. We have a team of dedicated social and environmental research analysts and advocates who help in the development of a social research report that's used for the recommendation. The sector analyst does their own financial due diligence and writes up his or her summary recommendation. Our emphasis at this stage of the process is finding companies that we believe are going to be attractive in the long run, where the social and environmental profile is being managed appropriately both in terms of risk and opportunity, where the company is positioned well for the long term from a strategic perspective and has strong management in place. We encourage analysts to bring stocks to the investment management committee across the capitalization spectrum. We will invest all the way from mega-cap stocks down to small cap stocks. We're relatively conservative in our management of small cap and we look for companies that are already profitable and they are typically at least 300 million in market capitalization before they are put on our approved list. We think about this as the "Warren Buffett" part of our process, with not too much focus on the near-term attractiveness in terms of valuation or earnings momentum. We're looking for good management, good strategic positioning and a good social and environmental profile. The second stage of the process is to then rank all of the stocks on our approved list, as well as all of the major sectors of the US equity market, in terms of their six- to 12-month financial attractiveness. We call this our alpha map, with alpha being the relative attractiveness of stocks and sectors. We're very much believers in diversification at every stage of the investment process including investment insight. When people talk about generating alpha, they are referring to sources of insight in terms of which securities are going to outperform in the future and we look for multiple sources of insight or alpha. Within Trillium, each analyst develops a valuation matrix and a price target for each stock. We also have an analyst who has a strong track record in assessing the technical position of securities, so he ranks on a monthly basis all of the stocks on our approved list from a technical perspective. That's the second input into our process. We also use two quantitative models that we have purchased, which have been developed by outside experts, in systematic quantitative investing. Those quantitative models have a blend of growth factors, momentum factors and valuation factors. We then weight and score all of our stocks and sectors using these inputs. At the end of this monthly process, we have an updated ranking of all the stocks and sectors that blend technical momentum and valuation factors. It's a very systematic and rigorous process of rating the securities. One of our analysts leads the macro process and works with me to rank our sectors on a monthly basis. We call these our alpha rankings for sectors. So that's the second part of our process, to make sure that we have a continuous ability to look out on a six- to 12-month basis and say, out of the stocks that are on our approved list, which ones are most attractive right now and which ones are least attractive. And we do the same for sectors using this multi- factor input approach. Clearly forecasting is the hardest part of investing. The other steps, however, that are subsequent to that are often places where investors make a lot of unnecessary mistakes and I want to talk about those two parts of the process. The third step is portfolio construction and risk management and there we use a lot of tools for managing risks. We put a couple of limits of our own on our portfolio construction on the equity side. We have our limits within our model portfolios — what we're doing here is developing a set of model portfolios — and then I will talk about how those model portfolios translate into client portfolios. An example is our core equity product, our most popular strategy, which is benchmarked against the S&P 500 but is able to invest in stocks across the cap range. In developing the core equity model portfolio, we've put some limits on that model, which is how much any sector can divert from the benchmark weightings and that's usually plus or minus 3%. We put limits on the size of any one position, and we also use a risk model from Northfield Information Services to make our own forecast of relative attractiveness of stocks and sectors to develop an optimal portfolio from a risk and return perspective relative to the S&P 500. Then we convene as a group and look at the results of those optimization exercises. Our portfolio managers and analysts get together on a monthly basis, look at the results of those optimization exercises but then also bring their own insights and analysis about the stocks and the sectors and we decide on a set of trades to do within our model portfolios. These trades are evaluated within the risk model to assess the impact on expected risk and return. Finally, these trades are set within the model portfolios. So stage three is the development of risk managed, efficient model portfolios. Those model portfolios are then delivered within our portfolio accounting and trading system to our portfolio managers. Our portfolio managers very critically control the fourth stage of the process, implementation, which is also a place where a lot of mistakes can be made in the investment process without a strong process in place. One can have wonderful model portfolios, but then those model portfolios don't actually translate into client experience, because there is a style drift among portfolio managers or delays in terms of implementation and so forth. We do give portfolio managers some latitude in investing for clients because, again, we have customized investment policy statements. The model portfolio itself may not be exactly appropriate for each client. We give the portfolio managers a lot of tools for efficient implementation and they adhere quite closely to the model portfolio. Managers are also constrained in terms of how much sector risk they're taking and they cannot invest in stocks unless they are on our approved list. There are a number of constraints we put on, but we also give our experienced portfolio managers some latitude in terms of implementation. That's our investment process on the equity side. As I said, we've had very positive experience with this process by focusing on both risk and return. We have a strong long-term track record as well as an excellent run of benchmark-relative performance over the last several years.
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