Midland Asset Management, Dallas, TX, Fee-only Financial Planning, Wealth Management Firm Announces Enhanced Investment Due Diligence Process

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Traditional style box investing is not providing value add risk/return processes over indices.

Midland Asset Management has decided based upon academic and real world research to no longer use style box investing for client investment portfolios. Portfolios will be created with investment managers who think independently and are not "closet" index funds.

Style box investing started to gain momentum after the Employee Retirement Income Security Act of 1974 ("ERISA") required investment managers and consultants to act as co-fiduciaries to the non-profit firms they advised upon. The consultant industry began to analyze investment managers based upon their investment style (e.g. Large Value, Small Growth) and create risk and return statistical measurements for this style. This style approach created investment portfolios based upon the risk and return characteristics of the combined styles boxes decided upon by the pension fund/endowment fund. Investment managers and investment portfolios were analyzed, reviewed and graded based upon their risk and return performance against style indices (e.g. Russell 1000 Value, MSCI EAFE).

In 2001 Ennis Knupp, a Chicago based consulting firm, was one of the firm firms to note that style boxing was not the best way to go (see study in the Journal of Portfolio Management 2001). This study of Ennis Knupp concluded that on average the style box approach underperformed the designated index by more than 1.2% annually. A working paper by Russ Wermers (Univesity of Maryland working paper 2002) showed investment managers who "drifted" out performed investment managers who remained style box constrained by 290 basis points annually over 15 years.

Based on academic and real world research Midland Asset Management has decided to create invesmtent portfolios with managers who are style box constrained.

About Midland Asset Management
Midland Asset Management is a fee-only financial planning wealth management firm assisting a limited number of families with their complex wealth management and investment needs.

The firm's goal is to provide tax-efficient and balanced risk/reward investment advice following a disciplined and time tested methodology. This includes:
a) Analysis of your current financial and investment situation using Monte Carlo simulations and the creation of a coordinated wealth management framework to achieve and to maintain your financial freedom
b) Communication with your other advisors - estate, tax, and insurance - to make sure are all heading in the direction your goals require
c) Constant monitoring of your situation - estate, tax, and investment - to ensure your financial freedom and wealth goals

For more information, please visit http://www.midlandasset.com.


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Christopher Holtby

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