The Wall Street Transcript Talks with FundX’s Jason Browne

May 23, 2013

wallstreettranscriptThe Wall Street Transcript recently published a detailed interview with FundX CIO Jason Browne in its April 26, 2013 issue. Jason offered insights into the FundX’s Upgrading process, and, since this issue of The Transcript focused on the financial services sector, he explained how we get exposure to financials.

Since The Wall Street Transcript is available by subscription only, we’ve included a few excerpts from Jason’s interview.

Jason explained the three FundX services – NoLoad FundX newsletter, mutual funds and private client accounts – and he shared how the FundX Upgrading strategy differs from other investment approaches.

“From our perspective, FundX wasn’t so much about finding Fund ‘X,’ but about monitoring mutual fund perfor­mance, trying to identify which funds are doing well in the current environment, then adjusting our portfolios to continually align with the leading funds,” Jason said. “We do that as opposed looking for fundamental stories or themes. Using quantitative models, we choose leaders between value and growth strategies, large-cap and small-cap strategies, foreign or domestic leadership.”

We apply this same process to sectors, like financials which had come up our quantitative ranks in November 2012. Jason noted that FundX portfolios had a small 3% position in financial sector ETFs like SPDR Financial Select Sector (XLF) and iShares DJ U.S. Financial Services (IYG) at the time of the interview, but these ETFs weren’t currently top ranked. (Financial sector funds were ranked as holds in April and fell into the sells in May.)

Investors don’t have to rely on specific sector funds to get exposure to areas like financials. “We get exposed to financial services in a few different ways within our portfolios, from the big, diversified financial companies to regional banks, insurance companies, global financials, and even indices or countries—such as Switzerland or Sweden, where financials are a big component,” he said.  Financial services companies are held throughout many of the underlying diversified funds in our portfolios.  As of the end of March, over 18% of our largest portfolio was in that sector.

The ability to identify leading areas of the market and avoid lagging areas is attractive to investors. Jason explained that “the biggest thing that draws people to us, in addition to the historical track record, is the concept that one style or strategy doesn’t stay in favor forever, and that you are not going to be smart enough to be able figure out in advance what’s going to lead next. If you feel that way, come talk to us.”

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