Investment Choices

We embrace investment due diligence and research and strive to deliver a strong lineup of investment options to plan sponsors and participants. We build out multi-asset investment fund lineups with exposure to all major asset classes. We make sure to accommodate participants that want a “set it and forget” structure as well as a “do it yourself”. The specific funds within the lineup are customized depending on the needs and objectives of the plan and trustees.

Asset Class Strategy Selection

Little House Capital emphasizes the value of a well-diversified, risk-adjusted asset allocation. We build our fund lineups to achieve the following needs:

Exposure to desired strategy

  • Active/Passive
  • Style (market capitalization, growth/value, quality, …)
  • Region
  • ESG sustainable factors

Diversification potential

  • Number of names
  • Concentration in top holdings
  • Risk Profile

Liquidity & Cost

  • Assets under management
  • Trading Volume
  • Typical bid/ask spread
Liquidity &CostsStrategyDiversification

Fund Selection Process

Fund Selection Process

Universe Definition

  • Primary Share Classes
  • Style Purity – Cap and Value/Growth, Geography
  • Assets Under Management > $200M

Quantitative Scoring Factors

  • Performance relative to peers – 50% Weight
  • Consistency of returns – 20% Weight
  • Cost/Expense Ratio – 10% Weight
  • Downside Risk / Volatility – 20% Weight

Judgmental Factors

  • Manager Tenure
  • Portfolio Diversification
  • Risk Profile

Typical Plan Targeted Asset Classes

Little House Capital collaborates with our clients to migrate to a strategy that works with their participants. Below is a typical design for a fund lineup’s asset classes.

Quarterly Fiduciary Review

Each quarter Little House Capital conducts its comprehensive investment review designed to fulfill our fiduciary duty. This starts with a fund scoring process that is conducted for each fund within an investment fund lineup. The proprietary scoring allows the investment team to compare holdings within the lineup to its peers on distinct factors.

The key to providing superior investment lineups and fulfilling your fiduciary duty

Overview: Our proprietary fund scoring is used to compare individual funds within the investment lineup, relative to its respective peer group. This scoring methodology considers only quantitative information.

Little House Capital uses this scoring process to help guide recommendations for the fund lineup. We conduct this scoring review every quarter in conjunction with qualitative analysis in order to ensure proper fiduciary oversight of the plan. In addition, we compare the current quarter scores for the funds to the previous score to highlight the change in scoring.

Each fund is scored on a scale of 0-10 and, based on that score, put into a category decile. The scores are also matched to a color, with red equivalent to 0 and green equivalent to 10. The main factors that are considered for each score are performance, consistency, expense, risk, and volatility. Performance is the largest factor when determining a score. However, we put a premium on funds that have better risk controls and low volatility.

  • Performance: 50% Weight
  • Consistency of Returns: 20% Weight
  • Risk & Volatility: 20% Weight
  • Expense: 10% Weight

All metrics are judged in relation to peers

A fund with a low score does not necessarily need to be sold or removed from the lineup. However, that fund deserves a deeper review to decide the cause and potential for a further slide. The fund scores should be used in conjunction with qualitative analysis to determine if a fund should be removed and replaced in the overall lineup.

The fund categories are based on data pulled from Bloomberg. Within Bloomberg we have created fund screens that group the funds based on market cap, style, geographic focus, and asset class. In addition, we only include funds with at least $100 million in assets under management.

This fund scoring report is designed for use by the investment advisor and plan sponsor only. We do not recommend distributing to plan participants.

If you want access to our current fund line up and quarterly scoring, contact us.

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