Q:  What is the history and objective of the Compass Efficient Model Portfolios? A : Compass Efficient Model Portfolios, LLC was founded in 1996. Compass EMP offers globally diversified, multi-asset class investment portfolios for institutions, ultra-high net worth individuals and the Compass EMP Funds. The company is headquartered in Brentwood, Tennessee with about $800 million in assets under management. Compass Efficient Model Portfolios is the manager of the Compass EMP Funds. The Compass EMP Funds include the Compass EMP Multi-Asset Balanced Fund, Compass EMP Multi-Asset Growth Fund, and Compass EMP Alternative Strategies Fund. I serve as the Chief Investment Officer of Compass Efficient Model Portfolios, LLC and the lead Portfolio Manager for all the three Compass EMP Funds. Generally, we believe that risk management through low to negative correlating asset classes is the key to providing consistent returns and to help hedge against declining markets. Our objective is to win by not losing. Q:  What core beliefs drive your investment philosophy? A : Our philosophy is to have no opinion risk, no market risk and no asset risk, whatsoever. The goal is to be as efficient as possible when it comes to risk and return. It is all about how to protect downside risk and to provide lower correlation to traditional market risks. Q:  How does your philosophy translate into the investment strategy? A : The Compass EMP Alternative Strategies Fund is used as a comprehensive alternative to traditional stocks and bonds in an attempt to reduce portfolio volatility. As of October 31, 2011 the fund has produced about 70% less volatility than the S&P 500. The fund strives to meet its investment objectives by investing in a portfolio of Exchange Traded Funds, equities, fixed income and futures strategies, with an emphasis on alternatives including commodity, currency, stock hedging, bond hedging and real estate. We employ an investment strategy with a rules based strategic asset allocation methodology aiming to produce positive returns regardless of the direction of the financial markets. The methodology is designed to provide diversification among many asset classes, markets and economies around the world. The fund utilizes an investment process that employs global diversification among many low to negative correlating asset classes. Our focus is on traditional and enhanced indexed rules based strategies within the ETF market and the most liquid futures markets among the alternative asset classes in an attempt to capture improved risk adjusted returns over the long-term and avoid opinion risk. We start the process by identifying core liquid asset classes. Next, we evaluate correlation among multiple asset classes. We always want our assets to have low correlation during declining markets. So, that is an important factor in our strategy and construction. Furthermore, we do not have any capacity issues because we can use this strategy across many asset classes and handle large of capital in the fund. Our growth asset classes are equally weighted in an attempt to avoid opinion risk, asset class risk and individual market risk. The next part of our strategy is when we implement trend following, long-short strategies in an attempt to force low correlation among multiple asset classes. We rebalance asset classes based on upside and downside market movements forcing a buy-low and sell-high strategy. The rebalancing discipline is based on market movements, not by dates on the calendar or an opinion. For us, it is more important to focus on the asset because it is the asset that gives the investor low correlation to stocks and bonds. We do not make hedging decisions based on fundamentals; all hedging decisions are based on a price trends. There is a big difference between fundamental-based investing and following a trend. Trends don’t lie, but fundamentals can. Q:  How do you identify a trend? A : We use several different timeframes, some short term, some intermediate term and some long term and everything in-between. If the majority of those timeframes show that this is a confirmed downward trend, we can hedge risk. It really depends on the previous bull market duration and the nature of returns. Q:  How is trend-following different from momentum investing? A : In momentum investing, some managers, investors, trend followers and hedge managers will add to positions or reduce positions as momentum increases on the upside or on the downside. But, they sell out of a position as the value of the securities declines more, and as the value goes up more, they buy more. Of course, momentum investing can increase volatility. However, we just follow a trend, up or down. We try to take advantage of long-term moves that seem to play out in various markets and take benefit from both sides of the market, enjoying the profits from the ups and downs of many asset classes or markets. As a whole, we are not a momentum player at all because of the risk it entails. Q:  What kinds of trends do you generally like to focus on? A : We have an equity hedge long/short asset class comprising 16% of the portfolio. In that portion of the portfolio, we have exposure to 12 of the most liquid stock markets. We use the futures markets because that is the most liquid and cost effective way to get access to alternative markets. We follow each individual stock market and generally keep tab on the most liquid markets in the Americas, Europe and Asia. We follow the same trend algorithms among multiple asset classes, but it may happen that some are close to the trend and some are way below and some are not. In fact, some of the emerging markets are well below their trends. Q:  How diversified is your portfolio? A : It is an 80% growth and 20% income portfolio with a return objective in the 9% to 11% range. We have eleven different asset classes, such as commodities, currencies, real estate, stock and bond hedge, etc. As of this moment, we have about 120 securities, but most of those are futures. Our growth asset classes are equally weighted in order to avoid market risk, asset class risk and opinion risk. We follow each individual market independently out of 20 of the most liquid commodity markets from crude oil to natural gas to metals to agriculture commodities. At present, we have about five commodities that we are long and we have about 15 commodities that we are short. As for currencies, we have seven of the most liquid currencies in the world versus the dollar - the Australian dollar, the British pound, the Canadian dollar, the euro, Japanese yen, the New Zealand dollar, and Swiss franc. Currency markets are larger than stock markets and offer us another growth asset class. We also have exposure to eight of the most liquid bond markets in the world. Q:  Do you use a certain benchmark? A : We don’t have a benchmark. The fund’s performance is not designed to track any specific market or index over any given timeframe. Our fund is not about how we pick stocks, but how we pick asset classes and hedge risk.