Jason W. Browne

    “We incrementally move from style to style and from one area of the market to another in response to changing market leadership. Our goal is to capture the broad trends that last for years as opposed to every little shift that takes place in the marketplace.”

FundX Upgrader Fund


Adapt and Prosper

Author: Manish Shah  Last Update: 8:40 AM EDT May 30 2007
Symbol: FUNDX  This interview was recommended 1 time.


    Q:  What is your investment philosophy and how does it differentiate you from other fund managers?

    A: Our investment philosophy is based on the belief that market leadership changes over time, while most fund managers don’t recognize that fact. They usually follow a particular style or a strategy that works well in certain market environments although it may not work as well in others.

    Contrary to that approach, we have an investment strategy that adapts to changing market environments without trying to predict future leadership. We don’t believe that we are able to forecast the future, or that we would add any value by doing that. But we believe that by monitoring the performance of the funds and the components of the market, we can take advantage of changing market leadership.

    We manage a total of seven funds with a common strategy that is applied in a variety of ways. The funds differ mainly in terms of allocation, portfolio construction, and risk profiles. Currently we manage over $2 billion and the FundX Upgrader Fund has about $830 million in asset.

    Q:  What's the process that allows you to benefit from the changes in market leadership?

    A: Our strategy is based on relative performance and the approach is fairly straightforward. We classify the mutual funds by risk, which we measure by the level of concentration and by the historical downside record. To determine the different risk categories, we look at a combination of performance, volatility, portfolio construction, style, and management.

    Once we classify the funds, we rank them based on the average performance over the last one, three, six, and twelve months, or the various results within a year. The system is not overly optimized, and I believe that this is one of the reasons for its success. Effectively, we take a snapshot of the current winners on a bi-weekly basis but we rely on the monthly rankings for major portfolio decisions.

    Then we review the rankings to select the funds that are in the top 10% of their risk category for the portfolio. We have specific sell thresholds, and when they reach the threshold, we replace them with the current leaders. By consistently applying this approach, we incrementally move from style to style and from one area of the market to another in response to changing market leadership. Our goal is to capture the broad trends that last for years as opposed to every little shift that might take place in the marketplace.

    Q:  Would you explain your risk categories in more detail?

    A: We want enough variety in each risk catgory to potentially provide exposure to new areas as market leadership changes. In other words, in each risk category, we need value and growth orientations, different market capitalizations and both foreign and domestic funds represented. At the same time, we are cognizant of the fact that for each component of the portfolio, we have to understand and be comfortable with the level of risk. We only allocate money to funds with risk levels that are consistent with our objective.


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