Preferred Portfolio Services
PPS Select Managed Portfolios
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.
Matching your goals with your tolerance for risk is at the heart of any sound asset allocation model, and it’s an area where PPS Select stands out. Its managers rely on state-of-the-art asset allocation concepts and tools based on Modern Portfolio Theory to pursue a long-term strategy that’s rigorous and disciplined yet flexible enough to take advantage of short-term market opportunities.
Portfolio managers follow a comprehensive five-step due diligence process to determine which investments to include in or remove from the PPS Select portfolios.
Step 1: Screening
An initial screening process based on quantitative criteria is used as a starting point for further research. The purpose of the screening process is to narrow down the universe of investments that meet the managers’ objective criteria.
Step 2: Evaluation
After screening, the remaining investments are evaluated by applying a scoring system based on returns that are adjusted to take into account quantifiable risk. In addition, investments are evaluated based on their peer group ranking, benchmark-relative performance, and consistency of investment management style.
Step 3: Analysis
The objective of this step is to build a solid understanding of how an investment operates. During this stage, portfolio managers spend a great deal of time evaluating the investment’s philosophy and process to ensure that there is consistency. After in-depth quantitative and qualitative analysis is complete, they meet with key investment decision makers either on-site or over the phone to gain a greater understanding of the decision makers’ process for managing the portfolio.
Step 4: Portfolio construction
After portfolio managers have identified one or a group of investments that are attractive on a stand-alone basis, they spend a considerable amount of time assessing how well the investment fits with other portfolio holdings. They review certain metrics, like excess return correlation, to ensure that holdings will perform as expected in different market environments.
Step 5: Ongoing monitoring
Portfolios are monitored on an ongoing basis. Portfolio managers continually conduct performance reviews, holdings attribution analysis, firm commentary reviews, and regular conference calls and meetings to determine whether or not the portfolio is meeting their risk-adjusted return expectations.
Adherence to a consistent rebalancing strategy helps ensure that your PPS Select account stays on track and in line with the defined tolerance levels—or “bands”—allowable to a particular asset class. Over time, portfolio characteristics and asset weightings may shift away from this designated comfort range. Through proactive and continuous monitoring, portfolio managers can identify whether positions have become too risky or too conservative and make adjustments as necessary to rebalance the model’s target weight
*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.