How do you determine how many sub-advisors to hire for each fund and the blend of manager styles?
The number of sub-advisors is a function of the type of fund and the number of highly skilled managers we can identify as potential sub-advisors. Generally we expect to have at least three sub-advisors and preferably four to seven. The higher end would typically be for funds with multiple styles (e.g., Litman Gregory Masters Funds Equity) while the lower end would be single style funds.
We will not add a manager if we believe the new manager is not at least as skilled as the existing sub-advisors. We may also consider the distinctive nature of a particular stock picker’s investment approach. We are more likely to add a new sub-advisor if we believe they will add material diversification to the overall portfolio.
With respect to the blend of styles, unless it is a style-specific fund, we seek to keep each Litman Gregory Masters Funds roughly style-neutral. This can be accomplished by various combinations of value, growth and blend managers.