For as long as there have been financial markets to invest in, people have been trying to figure out ways to beat the market. Before the advent of mutual funds, stockbrokers were selling individual stocks and bonds to their clients. With the evolution of mutual funds, investors got the benefit of economies of scale by pooling their money with other investors. Professional managers were hired to develop a portfolio of stocks (or bonds or other investments) to invest these monies. These managers were attempting to outperform the market in order to keep their investors invested in their funds. The trouble is that history has shown us that 85% of these managers under-perform the "market". The index fund evolved out of such research and by just replicating the market returns was able to beat the majority of actively managed mutual funds. We go a step further and utilize institutional asset class (index-like) funds to construct client portfolios. These asset class funds were developed through further academic research designed to maximize the returns for different segments of the market.

Most investors realize that, for a portfolio of individual stocks, diversification reduces their risk of loss. This is the old adage "don't put all your eggs in one basket." In fact, you can essentially eliminate individual security risk (that any one company will go belly-up) by holding a large number (hundreds) of securities in a portfolio. Most investors diversify to eliminate this individual security risk through the use of mutual funds. However, you can further reduce your portfolio volatility (market risk) by holding a diversified portfolio of mutual funds (e.g., international, small value, large growth, etc.). Furthermore, research conducted by Fama and French has shown than diversification can actually add about one half a percent per year to the compound returns of a 60/40 portfolio (60% stock/40% fixed income) by dampening portfolio volatility (i.e. market risk). We create highly diverse portfolios which exploit these benefits of diversification.