How many stocks does the fund hold compared to the index?
The index right now has fewer stocks than normal – the average is around 2,000 stocks. The recent downturn has washed out some of the smaller companies. We usually have 450-500 stocks in the portfolio, although number that could increase in the future. We have an absolute criteria where the fund cannot differ by more than 1.50% from the sector allocations of the index. It’s a complicated process, but we also try to approximate the fundamentals of the index [p/e, median market cap, dividend yield, etc.] Do you take any steps to discourage “hot money” from entering the fund, especially since the asset class has been performing so well over the past three years? We just added a redemption fee [2% penalty within a six-month period] at the end of last year to further discourage market timers. Also, in the fund’s prospectus we explicitly state our funds are only for long-term investors. We don’t want market timers or people trading in and out of the fund. Any redemption fees collected revert
