The Top-Down Investment Process

As an investor, you can choose from tens of thousands of securities globally. To address this daunting task of selecting from this vast universe, Fisher Investments employs a top-down investment process and leverages a large research team to help make sense of a complex and vast investment landscape.

1 Forward-looking return attribution is an approximation intended for illustrative purposes and should not be considered a forecast of future returns or return attribution.

Relative to expectations, we evaluate economic factors to determine which countries and sectors will have particularly strong or weak economic fundamentals.

our approach

Top-down managers, like Fisher Investments, believe long-term returns are primarily impacted by higher-level decisions—like asset allocation (mix of stocks, bonds, cash and other securities) and category (size, style, sector, country and regional) choices. Individual stock selection is the tertiary investment decision.

Top-Down Investing

Bottom-Up Investing

Bottom-up managers select securities based on company-specific criteria. Size, style, sector, country and regional decisions are usually secondary, if considered at all. This approach is reflected in much of the financial media, which tend to lean toward company-specific news and “hot stocks."

~70% of returns: asset allocation—mix of stocks, bonds, cash and other securities ~20% of returns: category decisions—size, style, sector, country and region ~10% of returns: security selection

The Top-Down Investment Process

targets haystacks full of needles.

After we determine our forward-looking market outlook, we determine if you should be invested in stocks up to your recommended asset allocation's prescribed maximum. We believe this decision outweighs any other portfolio decision.

Finally, we choose the individual stocks and other securities best positioned to benefit from our view of a previously identified driver. Click the arrow below to learn about the questions we consider before selecting individual securities.

Next, we weigh economic, political and sentiment drivers to determine which categories (country, sector, style and size) may be in and out of favor. The primary categories we emphasize in portfolios represent our core strategy, which is positioned to do well if the market acts in the way we expect. Additionally, as the market doesn't always cooperate, it's important to build a counter-strategy to moderate risk in case category trends play out differently than we anticipate.

• Yield Curve Spread • Access to Credit • Relative GDP Growth • Monetary Base / Growth • Currency Strength • Relative Interest Rates • Inflation • Debt Level (Sovereign, Corporate, Consumer) • Country Correlation • Global Capacity • Infrastructure Spending • M&A, Share Issuance and Repurchase Activity

We don't discount the fact that stock selection affects returns. But we believe long-term returns are impacted much more by higher-level decisions: asset allocation and category choices.

• Country • Sector • Capitalization (Big vs. Small) • Valuation (Value vs. Growth)

• Duration • Issuer Type • Credit Quality • Taxable vs. Tax-Free

seeks a needle in a haystack.

How does the top-down investment process work?

Before looking at any asset categories or securities, we forecast global market conditions primarily based on three broad drivers for stocks: economics, politics and sentiment. From our analysis, we derive a broad market forecast. Click "Learn More" for specific examples of each driver.

Meet your portfolio decision-makers.

Ken Fisher, Jeff Silk, Bill Glaser, Aaron Anderson and Michael Hanson make up Fisher Investments’ Investment Policy Committee (IPC). The IPC, directly supported by Fisher Investments’ large research staff, monitors global economic and market conditions and makes strategic investment decisions for institutional and private client portfolios. Together, the IPC has over 150 combined years of industry experience. Hover over the portraits for IPC names.

Economics

What factors drive market returns?

Politics

We evaluate global politics to determine which countries and sectors will have particularly positive or negative political fundamentals.

Sentiment

We evaluate sentiment factors to determine if investor sentiment for countries and sectors is extremely positive or negative.

Determine Asset Allocation

70%

Choose Category Weightings

Select Individual Securities

Learn More

Stocks

Bonds

Security selection can be the difference between your portfolio outperforming its benchmark or lagging it over time. However, more often than not, the higher-level portfolio decisions drive investment results. Fewer and fewer securities survive the analysis the further we analyze. At the end of the process, the Investment Policy Committee is sufficiently informed to choose a specific security. The carousel shows some of the factors we consider while evaluating potential stocks based on the previously identified drivers.

Liquidity & Solvency Considerations: Is there sufficient trading volume to purchase and eventually sell the security without negative effects? Is there significant balance sheet or bankruptcy risk?

Valuation & Capitalization Considerations: How do the stock’s growth or value characteristics fit into current portfolio themes? How does the company’s size fit into our current portfolio themes?

Strategic Attribute Review: What is the company's competitive advantage? e.g. strong brands, high market share, low-cost producer, superior technology, strong balance sheet, strategic relationships, management, barriers to entry, consolidator, regional advantage, innovator, etc.

Attribute Execution Analysis: How is the company exploiting its advantage?

Relative Valuation Analysis: How do valuations compare to peers and/or company historical average?

Operational Risk Assessment: Are there material risks to the company's operations? Red flag examples: outstanding regulatory or legal litigation, many off-balance sheet items, environmental concerns, pending corporate actions, executive departures, poor labor relations, stock ownership concentration, customer concentration, etc.

how we create portfolios personalized to you

our research organization

The IPC are supported by a large research staff focused in four primary areas. Click on the individual teams below to learn more.

IPC

applied research

theoretical research/risk control

suitability analysis

implementation/ monitoring

capital markets research team

securities research team

capital markets innovation team

portfolio evaluation group

implementation team

Gathers information to assist the IPC in determining asset class, country and sector forecasts, and portfolio themes. • Global Political, Macroeconomic and Sentiment Analysis • Theme Development • Regional/Country Coverage • Global Sector/Industry Coverage

Conducts initial analysis and ongoing monitoring of all portfolio securities. • Fundamental Security Analysis • Global Sector/Industry Coverage • Monitors Portfolio Holdings

Assists the IPC with the development and modification of portfolio drivers with theoretical, quantitative-driven capital markets technology. • Development/Modification of Portfolio Drivers • Portfolio Risk Management, Measurement and Modeling • Performance Attribution

Provides personalized portfolio analysis for Private Client Group clients and prospective clients. • Suitability Analysis and Client Proposals

Oversees and applies portfolio changes as instructed by the IPC, portfolio strategy and client restrictions. • Implements Model Portfolios (constructed by the IPC) • Order Generation • Cash Flows and Portfolio Rebalancing

Developing Our Market Outlook

How Our Top-Down Investment Process Works

Our Approach

How We Create Portfolios Personalized to You

Meet Your Portfolio Decision-Makers

Our Research Organization

Bonds

20%

Stock Categories:

Bond Categories:

10%

Disclosures

Mix of stocks, bonds and cash

Asset Allocation:

Determining Asset Allocation & Securities Selection

Learn More

Economic Drivers

Capital Markets research team

securities research team

Capital markets innovation team

portfolio evaluation group

implementation team

Political Drivers

• Taxation • Property Rights • Structural Reform • Privatization • Trade / Capital Barriers • Current Account • Government Stability • Political Turnover

• Mutual Fund Flows • Relative Style, Asset Class and Category • Valuation and Performance • Media Coverage • Institutional Searches • Consumer Confidence • Foreign Investment • Professional Investor Forecasts • Momentum Cycle Analysis • Risk Aversion • Fundamental vs. Behavioral Factor Analysis

Sentiment Drivers

Learn More

learn more

The 10%: How We Select Stocks

Investment Objectives

Your Time Horizon

Cash-Flow Requirements

Outside Income & Assets

Capital Gains

Risk Tolerance

Your Portfolio

Is your primary goal for your portfolio to target long-term growth, provide a certain level of cash flow or some combination?

How long do you expect or need your money to be working toward your objectives?

How should your portfolio be managed to accomodate your cash-flow needs, should you have them?

How are your outside assets positioned and how does your managed account fit into your overall net worth? Do you receive cash flow from sources other than your portfolio?

How can we address the impact of capital gains? Restrictions or Customizations: What other personal needs or desires should we consider?

Are you comfortable with our recommendation and is it suited to your stated investment objectives and time horizon for your portfolio?

Your Time horizon

Risk Tolerance

Investment Objectives

Capital Gains

Outside Income/Assets

Cash-Flow Requirements

To build a portfolio consistent with your goals and objectives, we must understand your complete financial situation as it relates to the assets we will manage. This will enable us to apply a strategy we feel best fits your particular situation. As your circumstances may change over time, we will periodically reasses your needs. The graphic below shows some of the questions we may discuss with you to better understand your complete financial situation. Click on the tabs below to learn more.

Investing in securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice or a reflection of the performance of Fisher Investments or its clients. Nothing herein is intended to be a recommendation or a forecast of market conditions. Rather it is intended to illustrate a point. Current and future markets may differ significantly from those illustrated herein. Not all past forecasts were, nor future forecasts may be, as accurate as those predicted herein. © Fisher Investments. MCER03 - Q1230228.

Founded in 1979, Fisher Investments is a privately owned, independent investment adviser offering a global approach to portfolio management for high net worth and institutional clients.

About Fisher Investments

Founded in 1979, Fisher Investments is a privately owned, independent investment adviser offering a global approach to portfolio management for high net worth and institutional clients.

About Fisher Investments

The 10%: How We Select Stocks

Ken Fisher

Aaron Anderson

Michael Hanson

Bill Glaser

Jeff Silk

The 10%: How We Select Stocks

Relative Valuation Analysis: How do valuations compare to peers and/or company historical average?

Attribute Execution Analysis: How is the company exploiting its advantage?

Valuation & Capitalization Considerations: How do the stock’s growth or value characteristics fit into current portfolio themes? How does the company’s size fit into our current portfolio themes?

Liquidity & Solvency Considerations: Is there sufficient trading volume to purchase and eventually sell the security without negative effects? Is there significant balance sheet or bankruptcy risk?

The 10%: How We Select Stocks

Relative Valuation Analysis: How do valuations compare to peers and/or company historical average?

Attribute Execution Analysis: How is the company exploiting its advantage?

Valuation & Capitalization Considerations: How do the stock’s growth or value characteristics fit into current portfolio themes? How does the company’s size fit into our current portfolio themes?

Liquidity & Solvency Considerations: Is there sufficient trading volume to purchase and eventually sell the security without negative effects? Is there significant balance sheet or bankruptcy risk?

The 10%: How We Select Stocks

Relative Valuation Analysis: How do valuations compare to peers and/or company historical average?

Attribute Execution Analysis: How is the company exploiting its advantage?

Valuation & Capitalization Considerations: How do the stock’s growth or value characteristics fit into current portfolio themes? How does the company’s size fit into our current portfolio themes?

Liquidity & Solvency Considerations: Is there sufficient trading volume to purchase and eventually sell the security without negative effects? Is there significant balance sheet or bankruptcy risk?

The 10%: How We Select Stocks

We believe long-term returns are primarily impacted by high-level decisions—like asset allocation and category choices.

Key Takeaways

Before looking at any asset categories or securities, we forecast global market conditions primarily based on three broad drivers for stocks: economics, politics and sentiment.

To build a portfolio consistent with your goals and objectives, we must understand your complete financial situation as it relates to the assets we will manage.