The Investment Policy Statement is the blueprint for the myriad of investment decisions required of a client’s fiduciaries. This document lays the foundation and establishes the parameters for how the client’s portfolio will be operated, including:

  • Determining the purpose of the Fund
  • Determining the responsibilities of the parties
    • Investment Committee or Board
    • Investment Managers
    • Investment Consultant
    • Other Service Providers
  • Setting the Fund’s goals and objectives
  • Establishing the Fund’s time horizon
  • Identifying key constraints
  • Outlining risk-return expectations
  • Establishing the benchmarks to be used for evaluation
  • Validating the Fund’s asset allocation policy and ranges


Equitas has extensive experience developing, reviewing, and revising investment policy statements. We have done a great deal of work with a wide variety of organizations to clarify and enhance their investment policy guidelines.

Our philosophy in regard to investment policy is to be a collaborative extension of your staff. We work closely with our clients to make sure we understand the history behind prior decisions and incorporate the current legal and investment environments into this document. We work together to build a living document that effectively works as a guide to meet each client’s objectives, while at the same time provides prudent risk management oversight.

A well-crafted Investment Policy Statement is evidence of the procedural prudence exhibited by the client’s fiduciaries. At the same time it becomes a flexible tool which may be modified as circumstances warrant.

Asset allocation is an integral part of any full service consulting relationship. While various methods and approaches to asset allocation are common, the effectiveness of a given method is dependent on the inputs used. Asset allocation is, quite simply, as much art as it is science. The results of using a quantitative model are extremely sensitive to the projections on which the model relies. Some of the key considerations which Equitas Capital Advisors employs in our process are:

  • Determining the Fund’s liabilities
  • Determining cash flow patterns
  • Determining the optimal mix of asset classes
  • Defining tolerance for risk
  • Establishing expected rates of return
  • Factoring in liquidity requirements
  • Accounting for key constraints


The process begins with a comprehensive assessment of the Fund’s objectives, preferences and constraints. At this point we blend the Fund’s cash flow needs, actuarial functions, liquidity concerns, regulatory constraints, risk tolerances and the funding status into a comprehensive decision matrix in which an asset allocation strategy can be developed. The final results become part of the Fund’s Investment Policy Statement.

Equitas Capital Advisors uses the Ibbotson methodology for asset class assumptions, including the Nobel Prize winning capital assets pricing model (CAPM) and Black-Litterman methodology. Our asset allocation modeling capabilities are unique in that we have specialized expertise in capital markets, mathematics, and simulation. We have long and varied experience with Monte Carlo analysis for assets and liabilities including consideration of market consistency as well as real-world scenarios, and the necessary interrelationships of factors in such an approach. In the investment arena, this expertise has translated to our evolution beyond a basic static Markowitz efficient frontier method to one that incorporates Monte Carlo modeling to address such issues as forecast uncertainty. The results of an asset allocation study enable us to understand the future financial profile of the client under a particular set of assumptions (asset classes and constraints). Varying any of the assumptions leads to a variation in the results, the nature and magnitude of which help us to understand the sensitivity of the client to certain economic environments. In this way, the future needs of the client can be understood under a variety of circumstances, and the optimal solution to the client’s situation can be sought.

Equitas Capital Advisors offers state-of-the-art asset allocation modeling and risk budgeting capabilities. Our asset allocation analyses quantify the potential financial impact on the portfolio and are tailored to our clients’ specific circumstances and financial objectives. We believe that the overall risk tolerance is of paramount importance in developing an investment policy. We seek to identify the appropriate level of risk to be taken and the optimal blend of risks to achieve our clients’ specific objectives. Through a comprehensive risk budgeting analysis, we can also address asset allocation (beta) and portfolio structure (alpha) risk/return together to develop more financially efficient portfolios than might be otherwise attained if they were addressed separately.

The theory and practice of developing asset allocation assumptions changes over time. Equitas Capital Advisors has been working on incorporating new assumptions and methodologies into its repertoire.

Equitas recognizes the importance of asset allocation in client portfolios as well as the importance of preserving capital through downturns. We also recognize that markets and fundamentals can become dislocated especially during times of distress, and in those cases “relative” performance may still be poor. Even an active manager that beat his benchmark by 10% that year still would have lost a whopping 42.3%.

Therefore, Equitas has designed a service using proprietary indicators based on the momentum and trends of asset classes designed to help smooth out returns during times of distress.

The Equitas Active Asset Allocation strategy has two objectives:

  • Deliver positive absolute return over a one-year period
  • Outperform inflation plus 5% over a three-year period


Additionally, the strategy aims to offer:

  • Daily liquidity
  • Transparency
  • Monthly rebalancing
  • Diversification across numerous asset classes

Equitas Capital Advisors employs a variety of qualitative and quantitative screening criterion in the manager search and selection process. Our goal is to identify and evaluate investment managers who consistently demonstrate superior overall attributes.
The qualitative factors we consider are often called the Five P’s:

    The background and experience of the people who actually manage the Fund’s assets is just as important as the results they achieve.
    The investment philosophy of a money manager will shape the risk and return experience of the investor.
    We drill down to obtain a thorough understanding of their investment philosophy and risk controls to determine how they do what they do.
    An analysis of a manager’s underlying portfolio is essential in determining the consistency of the manager’s stated investment style with his actual investment decisions.
    The final measure is of the manager’s risk-adjusted performance over a number of market cycles and rolling periods.

The quantitative aspect of our analysis is supported by seven comprehensive databases of investment managers incorporating every possible type of portfolio–from mutual funds and commingled trusts to separately managed portfolio to limited partnerships. Investment performance is examined over a number of different market cycles for:

  • Consistency of Returns
    • Rolling Periods
    • Up Market – Down Market Capture
    • Portfolio Dispersion
    • Relative & Absolute Measures
  • Consistency of Investment Style
  • Dispersion in Investment Returns
  • Regression Statistics
    • Alpha
    • Beta
    • R-Squared (R2)
    • Information Ratio
    • Sharpe Ratio
  • Tracking Error

Equitas Capital Advisors is committed to a program of ongoing due diligence to ensure that once an investment manager is retained for the Fund that their firm remains in a position to recreate past successes.

Once an investment manager has been selected for the Fund, Equitas Capital Advisors begins the process of measuring and evaluating their performance. The primary objectives in this process are:

  • Investment Returns
  • Versus Investment Policy
  • The Degree of Risk Assumed in Achieving Investment Results
  • Current Market and Economic Conditions
  • Relative and Absolute Measures


Our staff of professional performance analysts engages in a seven-step process to produce a client’s performance report.

  • Step One – Accumulate Investment Data from Account Statements
  • Step Two – Calculate Returns
  • Step Three – Reconcile Returns
  • Step Four – Measure Returns Against Benchmarks and Universe
  • Step Five – Analyze Portfolio Performance
  • Step Six– Provide Portfolio Commentary
  • Step Seven – Produce Custom Performance Report


Equitas Capital Advisors provides fully customizable reports on a quarterly basis which we review with the client face-to- face to address any questions or concerns on a proactive basis. We have found it useful to work with the client to design a variety of reports tailor-made for the different decision-making groups within a client relationship.

For instance, on a quarterly basis we may produce an abbreviated executive summary containing three or four specific pages intended to give the Board a high-level overview of the composite portfolio.

At the same time we prepare a more detailed executive summary for the Investment Committee that also contains investment manager modules and analysis.

Finally, we prepare a complete set of composite portfolio and manager level diagnostics and analytics on an annual basis–what we affectionately term “the brick” for its size–that provide tremendous detail on each of the portfolio’s investments.

On a periodic basis, Equitas Capital Advisors will conduct an in-depth analysis of the style consistency of the Fund’s investment managers. After all, the Fund has engaged a number of investment managers, each with their own investment style and performance attributes, in accordance with the Asset Allocation Study and Investment Policy Statement. When an investment manager’s portfolio or style changes without warning the Fund is no longer as diversified as it once was.

Unless you are invested in an index, every manager will have some style drift. Many consultants tolerate no style drift from a manager. We have found this practice to be impractical and inefficient in portfolio construction.

At times a manager will need to tilt or underweight the portfolio for safety purposes. At Equitas, we monitor and track manager style drift and calculate if the drift has actually helped or hurt performance. Our report provides:

  • Graphic confirmation of investment style
    • Capitalization – large, mid or small cap
    • Style – growth, value or core
    • Illustration of the degree of consistency and the effects of style drift
  • Individual managers and portfolio composite
    • Illustrate individual portfolios and the composite portfolio
  • Verification of composite portfolio diversification


Style analysis is a valuable tool that Equitas Capital Advisors makes available to all of our clients.

Attribution analysis is a popular tool amongst institutional money managers seeking a way to better evaluate the investment talent of portfolio managers. Simply put, this type of analysis segments investment returns into four categories:

  • Sector Returns: A portion of every portfolio’s return is due to the sectors in which the manager invested. Looking at returns due to sector performance is helpful in determining if the portfolio manager was skillful or just happened to be in the right place at the right time.
  • Style Returns: Often, a particular style of asset will deliver better returns than other styles in the same asset class. Accordingly, an investor with that particular style should have expected higher returns than other investors would have generated over the same period by investing in the same asset class. Again, a 20% return within a style that averaged a 20% return tells us that the portfolio manager may not be expected to perform better than average against their peers in the next year.
  • Activity Returns: Though some managers employ a buy-and-hold strategy, many make buy and sell decisions throughout a given period. These decisions are bound to effect performance one way or another based on the subsequent performance of the securities being bought and sold. Segmenting returns by Activity compares how movements in and out of particular investments contributed to the final return versus a simple buy-and-hold strategy. It tells you if a manager’s decisions to add or subtract positions from the portfolio helped or hurt the final return.
  • Security Selection: The most telling sign of investment talent can be found in the return due to security selection. This is calculated by removing the returns due to the allocation of the portfolio to a particular style or sector, which leaves an excess return due to security selection. For example, if a portfolio manager’s actual return was 20% for a given period, and his sector of choice had returned 10% over that period, we can determine that his security selection contributed an additional 10% of returns to achieve the 20% for the period. In other words, that portfolio manager was picking the best securities in the sector.


What we endeavor to find is that the portfolio manager’s stock selection contributed positively to the portfolio’s performance. That means that within that manager’s chosen sector and style, they were able to pick the right securities to deliver returns above and beyond those expected by the style and sector allocations. The higher the return due to security selection, the higher the degree of skill that the portfolio manager is exhibiting to find the right securities in the market, regardless of sector and style.

Over time, many plan sponsors become complacent believing that, because their 401(k) plan is participant-directed, they are relieved of the fiduciary liability for conducting ongoing due diligence on the investment options offered by their plan. At Equitas Capital Advisors we have over twenty-five years of experience in evaluating investment options in 401(k) plans.

Our comprehensive review and evaluation process includes:

  • Written Investment Policy Statement
  • General Analysis of Investment Options
    • Number of Investment Options Offered
    • Investment Styles Offered
    • Security Overlap Within
    • Investment Options
  • Detailed Analysis of Investment Options
    • Rolling Period Returns
    • Distribution of Returns
    • Correlation of Investment Options
    • Universe Analysis
    • Relative and Absolute Measures
  • Detailed Analysis of Service Providers
    • Plan Administration and Recordkeeping
    • Plan Structure and Options
      Investment Options
    • Fee Structure
  • Detailed Analysis of Plan Demographics
  • Development of Model Portfolios
    • Minimum of Three, Maximum of Five
      • Conservative, Moderately Conservative, Moderate, Moderately Aggressive, and Aggressive
    • Distinctly Different Asset Allocations
    • Distinctly Different Risk-Reward Characteristics
    • Fund Specific Recommendations

Alternative investments help to diversify a portfolio comprised of traditional asset types such as stocks, bonds, and cash. Alternative investments add diversity to a portfolio because they perform differently than these traditional asset categories in response to economic conditions. Most alternative investment assets are held by institutional investors or accredited, high-net-worth who are presumed to be sophisticated enough to understand their risks. Alternative investments are usually quite difficult to analyze and may lack liquidity. There may be limited historical risk and return data for investors to analyze.

Alternative Solutions

  • Hedge Fund of Funds
  • Enhanced Index Funds
  • Structured Products
  • Options and Warrants


Depth of Experience

  • Over $600 million invested in Alternatives
  • Onshore and Offshore
  • Hedge Funds
  • Real Estate (REITs)
  • Private Equity
  • Timber


Alternative Styles

  • Long / Short Equity
  • Convertible Arbitrage
  • Market Neutral
  • Merger Arbitrage
  • Event Driven
  • Fixed Arbitrage
  • Distressed Securities
  • Other Styles (Global Macro, Short Selling)


Extensive Research and Analysis

  • Independent Third-Party Databases of Hedge Fund Managers
    • 3,000+ in Morningstar-Altvest
    • 4,000+ in
    • 3,000+ in Eurekahedge
  • Due Diligence Staff
  • Prime Brokers
    • Morgan Stanley
    • Goldman Sachs
    • JPMorgan Chase
    • ABN Amro
    • Societe Generale, Zurich Capital, BNP

In an ever-changing investment environment, a Fund’s fiduciaries must stay abreast of trends and practices in the marketplace. The professionals at Equitas Capital Advisors have provided educational workshops and seminars for over twenty years.

Our services in this area include:

  • Trustee and Investment Committee Education
  • Investment Education Seminar Series
    • For Retirement Plan Participants
    • Maintains Compliance With IRC 404(c)
    • Security Overlap Within
    • Investment Options
  • Custom Designed Communication Pieces
    • Seminars
    • Newsletters
    • Workbooks
  • KnowRisk® Commentary


From one-on-one sessions designed to bring a fiduciary up to speed with a specific investment topic to a seminar for hundreds of plan participants, we bring our skills as educators and communicators to the fore to satisfy both the curiosity and the concerns of the inquiring fiduciary.

In our KnowRisk® Series, recent titles include:

  • Downturns and Recoveries
  • Global Investing
  • Emerging Markets
  • Inflation
  • Long-Term Investing
  • Portfolio Diversification
  • Portfolio Performance
  • Real Estate Investing
  • Risk and Volatility
  • Taxes & Investment
  • Performance
  • Rebalancing
  • Indexes


Our series of white papers has treated the following topics:

  • Alternative Investments
  • Hedge Funds – An Overview
  • Performance Measurement – Alpha
  • Performance Measurement – Beta
  • Performance Measurement – R-Squared
  • Procedural Prudence: When Should You Fire Your Money Manager?
  • Consulting Trends: Returns-Based Style Analysis
  • Your Investment Consultant: What You Should Expect


We have adapted this material into a series of workshops for trustees and investment committees that discuss a wide range of topics from Modern Portfolio Theory to the differences between time-weighted and dollar-weighted returns.

One of the most overlooked aspects of a client’s many relationships is their custody arrangement. Equitas Capital Advisors has developed an extensive screening and review process which allows us to evaluate a custodian on:

  • Experience and Commitment
  • Quality of Services Provided
  • Overall Fee Structure
  • Technological Capabilities
  • Securities Lending Capabilities


We believe that a properly structured custody relationship can have a significant impact on the overall success of a client’s investment program. Equitas Capital Advisors has forged an extensive network of industry contacts both locally and regionally.

In addition, Equitas Capital Advisors offers insured custodial services through Pershing Advisor Solutions, LLC, a division of the Bank of New York Mellon. Accounts receive the maximum insurance protection available through the Securities Investors Protection Corporation (SIPC®).

The Securities Investor Protection Corporation either acts as trustee or works with an independent court-appointed trustee in a missing asset case to recover funds. The statute that created SIPC provides that customers of a failed brokerage firm receive all non-negotiable securities that are already registered in their names or in the process of being registered. All other so-called “street name” securities are distributed on a pro rata basis. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims of each customer up to a maximum of $500,000. This figure includes a maximum of $100,000 on claims for cash. Recovered funds are used to pay investors whose claims exceed SIPC’s protection limit of $500,000. SIPC often draws down its reserve to aid investors. The cash and securities–such as stocks and bonds–held by a customer at a financially troubled brokerage firm are protected by SIPC. Among the investments that are ineligible for SIPC protection are commodity futures contracts and currency, as well as investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933. It is important to recognize that SIPC does not work the same way as the Federal Deposit Insurance Corporation in terms of blanket protection of losses.

In our experience, we have found it better to get excellent service at a reasonable price than to get reasonable service at an excellent price. Long-term, the former strategy more than pays for itself. With that said, Equitas Capital Advisors can assist in all negotiations between investment managers, custodians, and other service providers. In many cases, we have been able to affect overall savings equivalent to the fee for our services. In addition, we can assist with ancillary services such as securities lending and commission recapture programs which, if applicable, can further reduce overall expenses.

As part of our package of services, we provide an annual Fee Review which brings together a concise disclosure of the fees and expenses related to your investment program. These include:

  • Investment Management Consultant
  • Investment Manager(s)
    • Separate Accounts
    • Wrap Accounts
    • Mutual Funds
    • Hedge Funds
  • Custodian
  • Actuary
  • Attorney
  • Bank
  • Auditor
  • Record Keeper or Administrator