Preferred Portfolio Services®

The PPS Select program is a turnkey asset management program using mutual funds, exchange-traded funds, and closed-end funds with portfolio management provided by Commonwealth’s Investment Research team.

The portfolios are based on state-of-the-art asset allocation concepts and Nobel Prize-winning Modern Portfolio Theory. Advisors assist clients in matching risk tolerance, time horizon, and investment objectives to these tactically managed portfolios. PPS Select uses Commonwealth’s in-house Research team’s expertise, experience, and resources to create a consistent, well-thought-out methodology that is rigorous in nature but receptive to client needs. The result is a series of allocation models that seek to provide consistent, long-term, risk-adjusted returns for investors across the risk/return investment spectrum.

Investment philosophy
The Commonwealth Research team employs a due diligence process when selecting funds for inclusion or removal from the PPS Select portfolios. The process has five steps:

Step 1: Screening
An initial quantitative screen is used as a starting point for further research. The purpose of the screening process is to focus on funds that meet objective criteria and provide consistent, risk-adjusted returns.

Step 2: Evaluation
After screening, the funds are evaluated by applying a risk-adjusted scoring system to the remaining mutual funds. In addition, funds are evaluated based upon absolute performance, peer and benchmark-relative performance, and style consistency.

Step 3: Analysis
The objective of this step is to build a solid understanding of how a fund operates. This step requires careful attention to the five Ps of manager/fund analysis: philosophy, process, people, price, and performance.

Step 4: Portfolio construction Only a small number of funds make it to this stage. The fund finalists are reviewed on a quantitative and qualitative basis. Fundamental factors are discussed in greater detail and more quantitative data is examined, including upside/downside capture, benchmark tracking, and style analysis. Also, either a conference call or on-site meeting is conducted to confirm all of the Research team’s findings.

Step 5: Ongoing monitoring
The PPS Select portfolios are monitored on an ongoing basis to determine if they are meeting their investment objectives. The portfolios are evaluated based on absolute and relative performance, risk tolerances, attribution analysis, and style analysis. As portfolio characteristics and asset weightings drift beyond target levels, the portfolios will be rebalanced, as necessary, to keep asset weighting in line with objectives. In addition, the selected funds are continuously monitored and include a monthly performance review, holdings attribution analysis, firm commentary review, and regular conference calls and meetings.

Investors should consider the investment objectives, risks, charges, and expenses of the investment company carefully before investing. The prospectus contains this and other information about the investment company. You can obtain a prospectus from your financial advisor. Read the prospectus carefully before investing.