Q:  Would you provide an overview of the firm? A : RidgeWorth’s origins can be traced back to 1984 when our predecessor firm, Trusco Capital Management, Inc. was incorporated in Atlanta, Georgia. Over the years, Trusco's investment capabilities expanded to include a broad range of equity and fixed income styles. This expansion was the result of both organic growth and acquisitions as well as strategic investments which included STI Capital Management, Crestar Asset Management Company, Zevenbergen Capital Investments, Seix Investment Advisors and Alpha Equity Management. In March 2008, Trusco Capital Management, Inc. became RidgeWorth Investments, an investment adviser registered with the SEC as well as a holding company comprising of multiple and distinct investment boutique subsidiaries. RidgeWorth is a subsidiary of SunTrust Banks, Inc. I have been actively involved with RidgeWorth Funds and their predecessors since 1993. Q:  What are the investment objectives for RidgeWorth Allocation Strategies? A : The RidgeWorth Allocation Strategies include: the Conservative Allocation Strategy, the Moderate Allocation Strategy, the Growth Allocation Strategy, and the Aggressive Growth Allocation Strategy. The Conservative, Moderate, and Growth Allocation Strategies invest in over 20 stock and bond funds and are designed for investors with a range of risk tolerances, while the Aggressive Growth Allocation Strategy currently invests in sixteen separate equity mutual funds. The Conservative Allocation Strategy seeks both capital appreciation and current income. This Fund will have a 20%-40% equity exposure and is a suitable offering for investors who want income from their investment as well as an increase in its value, but want to reduce risk by limiting exposure to equity securities. The Moderate Allocation Strategy is concentrated on both capital appreciation and current income. This strategy will have a 40%-60% equity exposure and is appropriate for investors with a time horizon of at least 5 years until retirement. The Growth Allocation Strategy aims to provide long-term capital appreciation, with current income as a secondary objective. This product will have a 60%-80% equity exposure and is relevant to the needs of investors with a time horizon of 5 to 15 years until retirement. And finally, the Aggressive Growth Allocation Strategy seeks to provide a high level of capital appreciation without regard to current income. This fund will have 80%-100% invested in equity funds and is appropriate for investors with a time horizon of 10 to 20 years until retirement. Q:  What is the underpinning of the asset allocation strategies? A : The underpinning of the Allocation Strategies is to blend together a diversified set of strong performing assets within a disciplined framework to achieve strong returns with limited volatility relative to the benchmark. Our belief is that asset allocation is an effective and time-tested way to achieve strong performance with lower volatility. Q:  How do you do your asset allocation investment process? A : The asset allocation process starts with our models that include ranges for each asset category. Next we look at asset class valuations to see what’s cheap on both an absolute and a relative basis. We also look for economic and policy headwinds and tailwinds that could affect performance. Finally, we monitor technical and sentiment conditions in the market. Within the specified ranges, we increase or decrease exposure to a particular asset class when the situation becomes more favorable or less favorable. For instance, an asset class may have been underperforming for a period of time or gotten relatively cheap and the policy and economic headwinds that it may have been facing have recently turned positive. Under those circumstances and with an improved technical picture we would move to increase exposure. Q:  Could you illustrate with a couple of examples the catalytic trends that influence your asset allocation process? A : For example, we started adding to equity exposure in the second half of March 2009. At that time, the stock market had sold off aggressively, valuations were cheap, the economy was in a severe recession and market liquidity and access to credit was extremely tight. However, the pace of layoffs was slowing, a massive stimulus package had been passed and the Federal Reserve had just announced an unprecedented plan to purchase Treasury securities; all significant policy tailwinds. It became apparent to us that the risk-reward ratio was favorable for stocks and so we started adding. A somewhat different example. While we generally stay invested in all asset classes, extreme circumstances could cause us to exit a specific asset class. We did just that in 2008 with the bank loan market. RidgeWorth has a well-managed bank loan fund that is comprised of high quality senior debt issues. However, liquidity was starting to become tight during the financial crisis in 2008, and though the credit quality of those bank loans was satisfactory, the assets were becoming illiquid. My portfolio experience told me that this asset class could suffer in a thin trading environment, so we liquidated the position for a time to reduce fund volatility. Q:  What are the analytical steps in your asset allocation research process? A : I spoke about the broader asset allocation decision making process earlier. We start with disciplined models with controlled limits on asset class exposure. Then we adjust exposure within each range based on valuation, economic and policy tailwinds/headwinds, and technical market conditions. The Allocation Strategies invest in RidgeWorth Mutual Funds and exchange traded index funds, so the next step is to evaluate the ability of the various funds to contribute to alpha and control risk. We will not own individual stocks or bonds as these direct investments are prohibited by prospectus. For the most part, we select funds within the RidgeWorth Family of Funds, but we do use exchange traded funds to access those asset classes that are not directly available in the RidgeWorth family. For example, in the emerging market space and Treasury Inflation-Protected Securities or TIPS, we use ETFs. ETFs provide additional liquidity and flexibility to the fund management, so if we want to make a quick move in the funds, we will often use a smaller percentage of ETFs to get a position or a shift underway. The fund selection and weighting process revolves around three factors: asset class coverage, performance, and volatility. For example, the RidgeWorth Fund family has several very good growth stock funds, but they achieve their strong performance in different ways. Funds tend to receive a higher portfolio weight for performance consistency, but I also adjust weights based on how well the separate funds work together versus the index. This process is greatly enhanced by the ongoing and ready access I have to the fund managers within RidgeWorth. Q:  How many investable asset classes are there in your portfolios? A : The Funds use a fully diversified set of asset classes to help construct portfolios that meet the varying goals and risk tolerances of individual and institutional investors. The Allocation Strategies currently invest in eleven equity styles or classes and eight fixed-income categories. REITs are included in equities and TIPS are included with fixed-income. Q:  How do you select between various investable asset classes? A : From a shorter-term cyclical perspective we start with absolute and relative asset class valuations to see what’s cheap on both an absolute and a relative basis. We also look for economic and policy headwinds and tailwinds that could affect performance. Finally, we monitor technical and sentiment conditions in the market. Within the specified ranges, we increase or decrease exposure to a particular asset class when the situation becomes more favorable or less favorable. These are the ongoing drivers of the asset class weighting process. Our long-term or secular views of the markets and asset classes also shape the portfolio construction process. We regularly update our estimated future returns for asset classes for the coming 3-5 years. A good example of this longer-term perspective in the current environment is our view on the likely direction of interest rates and what that means for bond returns and durations preference. We believe bonds are nearing the end of a nearly three-decade bull market that began in the early 1980s. With that in mind, asset selection and weighting in the fixed-income portion of the Allocation Strategies has shifted to shorter duration funds as well as TIPS. From a stock standpoint, we will look fundamentally at how rapidly we believe the economy is likely to grow. There are macro factors that are involved because those will drive profitability growth. We will also add our expectations of dividend growth and what is likely to happen to the price-to-earnings ratio and then we will come up with estimated returns for the various equity classes. That is some of the fundamental research that we use in constructing a base model. Q:  What kind of diversification do you seek to maintain? A : Discipline and diversification are key elements to control risk. We establish upper and lower ranges for each asset class to allow the opportunity to add value to our clients, but shifts are executed within a disciplined framework. To that end, we will typically underweight an asset class rather than exit the investment and so maintain our strong diversification. An exception I have already mentioned was the decision to temporary exit the bank loan market due to its new, untested, and relatively illiquid nature. Additionally, we are always looking to expand exposure to asset classes that we believe can add longer term value to the Allocation Strategies. Q:  What risks are perceived at the portfolio level and how do you manage them? A : Our starting point for risk management is in the underlying models that establish upper and lower limits for asset class exposure. Individual fund volatility is another factor that influences portfolio construction and risk control. Additionally, we constantly monitor key macro factors such as economic risk, earnings risk, and credit risk, and duration risk. Another important risk I have highlighted above is liquidity risk or the ability to easily buy and sell an asset. There are macro and market-specific factors we monitor to track risk, but one of the best tools we use to monitor risk are the ongoing conversations with fund managers. This collaboration with the professionals “down in the trenches” provide practical, real time information to manage risk.