FQ Tax-Managed U.S. Equity Fund

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First Quadrant, L.P. uses a proprietary multi-factor quantitative model to construct portfolios that combine a top-down analysis of market and economic conditions with a bottom-up stock selection process. The top-down analysis consists of a review of market and economic data to identify those industries and sectors of the market that are likely to benefit from present and future economic conditions. The top-down analysis helps fund management determine how to tilt the portfolio relative to the benchmark in terms of style, market cap, and industry weightings. Individual stock selection, however, is driven by bottom-up models that focus primarily on

• Market sentiment (Wall Street’s view of the security, management’s view of the security, investors’ view of the security)
• Valuation (fund management is looking for stocks that are attractively priced), and
• Accounting fundamentals (e.g. earnings quality, profitability, and growth).

Ideal Investment

The ideal investment exhibits some of the following traits at various times:

• Positive corporate earnings revisions and earnings surprises
• Good corporate earnings momentum
• Attractive valuation 

Portfolio Construction

Portfolio management:

• Primarily invests in stocks that are constituents of the Russell 3000 Index.
• Utilizes a proprietary quantitative model to identify stocks with the greatest expected alpha
• Takes transaction costs, tax costs, and risk constraints into account
• Limits industry exposure to +/- 7 percentage points relative to the industry weights of the Russell 3000 Index
• Limits individual security weights to +/- 4 percentage points relative to the weight of the security with the Russell 3000 Index
• Targets a tracking error of 4%

Portfolio management also employs the following tax-sensitive investment techniques:

• Investing in stocks that pay below-average dividends
• Employing a buy-and-hold strategy designed to avoid realizing short-term capital gains and defer as long as possible the realization of long-term capital gains
• Realizing losses on specific securities or specific tax lots of securities to offset realized gains.

Sell Discipline

The investment team will sell a stock when:

• It has become unattractive based on the proprietary model
• Portfolio management deems that news about a company is a fundamental change not captured by the model
• The stock leaves the benchmark, although management may take several months to trade out of the stock

Investment Process Chart

Investors should carefully consider the fund's investment objectives, risks, charges, and expenses before investing. For this and other information, please call 800.835.3879 or download a free prospectus. Read it carefully before investing or sending money.

The performance shown represents past performance and is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. From time to time the advisor has waived fees or reimbursed expenses, which may have resulted in higher returns. The listed returns and yields on the Fund are net of expenses and the returns and yields on the indices exclude expenses. Current performance of the Fund may be lower or higher than the performance quoted. Performance data shown is current to the most recent month end.

There is no guarantee that these investment strategies will work under all market conditions, and each investor should evaluate their ability to invest for a long-term, especially during periods of downturns in the market.

The investment return and the principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.