Avantis Portfolio Changes

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We are always seeking to improve the efficiency and performance of our investment portfolios. Our Investment Committee has decided to replace up to 50% of our Dimensional Fund Advisor (DFA) Large Company Fund (DFUSX) with Avantis US Equity Institutional Fund (AVUSX). The new Avantis funds take advantage of research authored by Professor Robert Novy-Marx of the Simon Business School, University of Rochester. [1] Avantis Investors now gives our portfolios a tilt that combines both Value and Profitability which evidence shows should provide higher expected returns over the entire business cycle.

Although still a relatively new company, many of the leaders of Avantis have extensive backgrounds previously working for Dimensional Fund Advisors. Both the Chief Investment Officer Eduardo Repetto and the Chief Operating Officer Pat Keating have a combined experience of over 35 years in designing and implementing funds at Dimensional. We have completed our due diligence review of these funds including a conference call with Eduardo.

If you were a client of Telarray last year, you may recall that we have already included three additional funds from Avantis including Domestic Small Value, International Small Value and Emerging Markets. We are pleased to report that these three funds have performed well and, in some cases, even exceeded our expectations. We will examine the use of Exchange Traded Funds (ETFs) over mutual funds in cases where it may be more appropriate due to trading volumes, bid-ask spread and other measures of trading liquidity.

I want to reiterate that our basic Investment Philosophy has not changed. We are focused on refining and improving our portfolios in order to keep up with the latest research and technological advancements as they become available. Please do not hesitate to contact us if you have any questions along the way. And we all thank you for your support and confidence in us.

[1] Novy-Marx, Robert, The Other Side of Value: Good Growth and the Gross Profitability Premium (April 2010). NBER Working Paper No. w15940. Available at SSRN: https://ssrn.com/abstract=1598056


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