American Equity

Approach

McLean Budden may be broadly classified as a large capitalization manager with the security selection process being entirely bottom-up driven. We create a portfolio of forty to fifty securities generally selected from companies in the Standard and Poor's 500 Index (S&P 500).

Decision Making

Four portfolio managers together with twelve portfolio manager/research analysts cover the U.S. equity market with specific research responsibilities divided according to areas of expertise.  Fundamental research includes:

·          performing original research

·          evaluating external reports

·          attending industry functions

·          interviewing management

Our fundamental research assesses a number of factors including an estimate of earnings (or cash flow if applicable) as well as a conviction level concerning the stability of these earnings.  Each week this earnings forecast is combined with an estimated price/earnings multiple and the current price to arrive at price targets and total return expectations for the 150 stocks we monitor.  A full array of industry-specific valuation measures are utilized to arrive at price targets.  The stocks are then ranked according to potential return over the next year. The key criteria for our security selection are:

·          earnings growth

·          management quality

·          financial strength

·          business potential

·          earnings stability

·          return on equity

We also utilize a quantitative check in which stocks are run through a regression analysis.  Any significant variations from our forecasts are identified and the assumptions reviewed.  In most instances, our fundamental research is confirmed but the discipline of this quantitative check process is important.

Investment Process

Portfolio Composition

Our commitment to specific securities and industry sectors depends on the earnings potential of the particular companies we follow.  We rank the risk-adjusted returns according to each company's return potential, share liquidity and our assessment of the likelihood of the security attaining the projected return.

The group identifies leading companies with the potential for long-term capital appreciation. Specific issues will normally comprise 1 to 4% of the aggregate portfolio value.  While the process focuses on selecting specific companies, stock selection is also influenced by the desired weightings in the broad market sectors.

Following are our sector risk control parameters:

The Economic Sectors are classified according to the following:

The portfolio uses the following risk control parameters: 

• no single security will comprise more than 4% of the Fund
• individual security weights will vary by no more than +/- 4% of their weight in the S&P 500 Index

Cash and short-term holdings are normally limited to 5% of the Fund.

Research

The four members of the U.S. Equity Group have research responsibilities and have the capability and experience to conduct independent research and assess the validity of views offered by outside analysts.  Twelve portfolio managers/research analysts assist them by providing continuous independent research.  Internal research responsibilities are allocated on a global sector basis and focuses on large capitalization multinational companies.  Meetings with management occur on a periodic basis, often at industry conferences as well as at our office.

Buy and Sell Decisions

The decision to buy or sell a security is the result of the investment decision-making process.  When buy or sell targets are reached, the portfolio must add or trim its exposure unless the target is in the process of being revised.  Price targets are used primarily for adjusting security positions rather than, in the case of sales, completely eliminating the security.  The degree of adjustment will depend on the size of the holding and simultaneous developments in the outlook for other securities being monitored.  The quality of the balance sheet is a key factor used to trigger the selling of a position.

Fees

Segregated Fund Management

Pooled Fund Management

HNW Fees

Private Client

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