The PIE Funds are, above all, tax efficient. Their corporate class structure
ensures that there is no taxable disposition on rebalancing.

Tax efficiency. Given the importance placed on security selection by the business press, as well as many advisors and investment counselors, it’s surprising that security selection in fact has only a relatively small impact on wealth creation. At a 2% importance ranking, the choice of individual security as a key determinant in growth of an investment portfolio is dwarfed by the overall tax efficiency of the portfolio, which has an importance ranking of 28%.

The PIE Funds remove emotion from the investment mix.

The role of emotion. Another key factor contributing to portfolio growth is investor emotion. Markets are said to be driven by fear and greed. Given free rein, these two emotions can severely dampen longer-term portfolio performance, because they imply an effort to time the market.

Research has shown again and again that no investor – whether individual small investor or giant institutional pension manager – can consistently call the bottom or the top of market moves. This was amply demonstrated in the bear market that began in 2007, when many of the world’s largest investment pools managed by the world’s smartest money managers using an active-management philosophy were caught flat-footed by the global credit crisis. In an effort to maintain portfolio performance they were forced to sell into a plummeting market, with predictably disastrous results.

Asset mix. Each PIE Fund portfolio has a predetermined asset mix that targets specific investment objectives and risk tolerance levels. Fund assets are carefully allocated among a diversified mix of broad-based exchange-traded index funds, further diversified by geography and style. Portfolios are periodically rebalanced back to original weightings when allocations become skewed owing to systemic market activity.

For example, a steep drop in equity market valuation might drastically skew a 50/50 fixed-income/equity balanced portfolio to an overweighting in fixed income. Rebalancing means reducing the overweighting in fixed-income and applying the proceeds back to equities. This ensures a disciplined “sell high/buy low” trading mechanism and eliminates the tendency for emotion to rule investment decision-making.

Covered option-writing. In addition, a program of disciplined covered option-writing, implemented at the discretion of the fund manager, further dilutes the potentially damaging effects of the emotional component by aiming to manage risk and generate tax-advantaged cash flow during periods of exceptional market volatility.