In markets where we believe net, net outperformance is achievable, we use active managers that tend to be fairly highly concentrated. With these managers, the bulk of fund capital is focused on their best investment ideas. We believe if we are going to invest our client’s money with active managers, we only want firms that possess the power of conviction. After all, who wants a fund manager’s 178th best stock idea in their portfolio? However, with concentrated portfolios, you often get tracking error.

Inevitably, these managers will experience periods of underperformance versus their benchmarks. That said, we believe only those managers that are willing to make concentrated selections at the expense of hugging their benchmark will have the opportunity to outperform over time, net of fees and taxes. Lifting the Barbell We believe our carefully defined and allocated client portfolios combine the best of both worlds. In more efficient markets (e.g., U.S.

stocks and municipal bonds), we deploy low cost, tax efficient passive vehicles. In less efficient market segments (e.g. European equities, high yield bonds), we often utilize active managers that can add value through skill and unique knowledge of factors that drive securities prices. In combination, we believe our barbell strategy provides our clients with the best opportunity to outperform over time, net of fees and taxes.

To us, that is the bottom line and the power of a barbell approach. Convergent’s Live Well Series is produced to advance dialogue on topics to help people “Invest Well. Manage Well. Live Well.TM” It is our hope that these articles will illuminate, intrigue, and inspire—and we invite you to join the conversation. If you have questions, or wish to discuss any of our thought leadership articles, please contact your investment advisor or email us at: LiveWell@ConvergentWealth.com Disclosure: Past Performance Is No Guarantee Of Future Performance.

Any opinions expressed by Convergent employees are current only as of the time made and are subject to change without notice. This article may include estimates, projections or other forward looking statements, however, due to numerous factors, actual events may differ substantially from those presented. While we believe this information to be reliable, Convergent Wealth Advisors bears no responsibility for the advice or information provided in this article whatsoever or for any errors or omissions.

Moreover, the information provided is not intended to be, and should not be construed as, investment, legal or tax advice. Nothing contained herein should be construed as a recommendation or advice to purchase or sell any security, investment, or portfolio allocation. This article is not meant as a general guide to investing, or as a source of any specific investment recommendations, and makes no implied or express recommendations concerning the manner in which any client's accounts should or would be handled, as appropriate investment decisions depend upon the client's specific investment objectives.

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