Large institutional investors have long employed an approach to investing known as “multi-management,” which is the practice of allocating portfolio assets among a group of carefully-selected, independent investment management firms. The two primary benefits of this approach are the pursuit of risk reduction through diversification and potentially greater consistency of returns through time.
This is the concept behind the Liberty All-Star Funds: Enabling individual investors to access a portfolio of diversified, institutional-quality equity investment managers in support of their long-term investment objectives.
The Liberty All-Star Equity Fund is a core equity holding that allocates its assets to three value style investment managers and two growth style investment managers. As is well known to professionals, market sentiment routinely rotates among these two principal investment styles as market and economic conditions change. At any point in time, one style is usually favored over the other. By allocating its assets to multiple managers representing both styles, the Fund seeks more consistent performance, which, over time, can produce better results than more volatile single-manager funds. Typically, value style managers focus on companies with attractive prospects but that trade at comparatively low multiples of earnings, revenue and book value. Growth style managers generally concentrate on companies with high expected sales and earnings growth that are leaders in expanding sectors of the economy.
The Liberty All-Star Growth Fund follows a similar principle but with an exclusive focus on growth style investing. The Fund allocates its assets among three investment managers, each specializing in either large-cap, mid-cap or small-cap growth style equities, thus diversifying the Fund across the capitalization spectrum. The result is a high-quality, multi-cap growth holding for long-term investors.
ALPS Advisors serves as the Funds’ investment adviser—because even all-star investment managers need a steady hand at the helm to work as a team. ALPS Advisors rigorously researches, retains and combines investment managers with complementary styles. ALPS Advisors then continuously monitors the managers to ensure that they adhere to each Fund’s objective and are performing in line with expectations. ALPS Advisors also performs the all-important function of periodic rebalancing, a well-recognized investment discipline, to maintain the Funds’ structural integrity. Further, having an investment adviser select independent investment managers (as opposed to in-house entities) helps to ensure alignment with shareholders’ best interests. And both Funds are governed by a Board of Trustees/Directors elected by and responsible to shareholders.