Philosophy
The advantages of passively managed index strategies, such as lower cost, relative tax-efficiency, diversification and style integrity, make a strong argument for using them as the core of an investment portfolio. Thus Summit focuses on offering index strategies based on broad, well-known indices across a variety of asset classes. This wide array of Summit index strategies offer an efficient, effective way to invest comprehensively in a variety of market segments, thereby providing diverse asset allocation opportunities in an easily constructed portfolio.
Strategy
The primary goal of Summit’s index strategies is to obtain returns that have a high correlation to the investment performance of their indices (before expenses). To that end we will strive to minimize tracking error by reducing trading expenses through efficient management of our index strategies. Also, in order to maintain full exposure to the underlying index, Summit will invest the amount of cash on hand in futures contracts or other instruments that closely track the appropriate index (this is also known as equitizing cash).
Our standard portfolio management strategy is full replication of the index, owning all the benchmark securities at the same weights as the benchmarks. Certain index strategies are constructed utilizing stratified sampling strategies to reduce costs when an index consists of thinly traded and/or a large number of securities. Examples of this are indices such as the MSCI EAFE International Index and the Lehman U.S. Aggregate Index.
To help achieve these goals Summit uses a trade-positioning system to analyze portfolios. This trade-positioning system enables us to compare our portfolios side by side to their benchmarks, evaluating overweightings or underweightings on a security by security basis. This allows us to efficiently calculate rebalances, or investments and redemptions of cash, while continuing to replicate the index. It also allows us to efficiently and effectively buy “slices” or “baskets” of stocks in an index, thereby reducing portfolio turnover.
Passively Managed Index Strategies
- Large Cap
- Mid Cap
- Small Cap
- International
- Fixed Income
- Balanced
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