Monthly Investment Commentary

We answer questions about our investment views and portfolio positioning in this month’s commentary. On the subject of the biggest risks we see over the next few years, we continue to view the global debt overhang and disorderly debt-deleveraging process as the biggest risk to the financial markets, with Europe at the forefront. We are investing in a time where patience and discipline, and an increased focus on risk assessment and risk management, are more important than ever.

Fund Research

FPA New Income: Despite recent marginal strength in consumer spending, Atteberry believes there is a very good chance that U.S. economic activity will trail off in the coming quarters, impacted by looming political uncertainty and the ongoing need for debt deleveraging.

Longleaf Partners; Longleaf Partners Small Cap; Longleaf Partners International: Despite the run up in equity prices so far in 2012, manager Staley Cates tells us that stocks owned by Longleaf Partners and Longleaf International remain very attractively priced, trading at average price-to-value ratios in the low 60s and high 50s, respectively, compared to a long-term average in the high 60s.

Osterweis Strategic Income: Kaufman says he is seeing signs of economic improvements in the United States, which are leading to higher bond and equity prices. But, given a number of macroeconomic concerns, he is still generally avoiding exposure to interest rate risk in Treasuries and investment-grade bonds.

Turner Emerging Growth: We are adding Turner Emerging Growth to our Recommended list in the Smaller-Cap Growth category. Over the course several years of interactions (with increasing exposure in just the past four years), we have found Sustersic to be a thorough, disciplined, thoughtful, and intellectually honest investor.

Brandywine Funds: On March 1, 2012, Friess Associates, advisor to the Brandywine Funds, reduced its staff by 10 employees as part of a broader restructuring plan. The eliminated positions included two members of the research team, one trader, and seven administrative personnel. According to the management representatives we talked to, the workforce reduction “better aligned operations with current asset levels while providing the opportunity to optimally position the investment team.”