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As anyone who is invested in the market knows, there are risks associated with nearly all investments and it is a double-edged sword. Sure, you'd like to make a fortune in the markets - who wouldn't? The first thing you need to understand, before you commit even a dollar to a portfolio, is that it is impossible to realize a return on any investment without facing a certain degree of risk. According to Webster's Dictionary, risk is the "possibility of loss or injury". In investing, risk is the chance you take that returns on a particular investment may vary. In other words, there are no "sure things" when investing. No matter what you decide to do with your savings and investments, your money will always face some risk. You could stash your dollars under your mattress or in a cookie jar, but you would still run the risk of losing it all if your house burned down, quite possibly with fewer dollars in real terms than when you started! Investing in equities, bonds or cash carries risks of varying degrees. The second fact you need to face is that in order to receive an increased return from your investment portfolio, you need to accept an increased amount of risk. Keeping your money in a savings account reduces your risk, but it also reduces your potential return. While risk in your portfolio may be unavoidable, it is manageable.

When it comes to risk, many investors just assume that it is the "price of admission" for being invested in the market. They think they will just have to go along for the ride. What they don't realize is that there are ways to help manage risk - by understanding the market and carefully monitoring its movements. But this task is not something easily undertaken alone. It is a job best left to the professional techniques of full time strategists who make it their mission to monitor the market each and every day. The program starts with an investor profile questionnaire that is used to understand your goals and objectives, as well as your willingness and ability to take risk. The profile assists in the selection of an appropriate classification for each particular investor - ranging from conservative to moderate/conservative to moderate to moderate/aggressive to aggressive. These five profiles guide the investment allocations of the program so they are most appropriately tailored to your investment goals. Your investment is then broadly diversified by allocating the assets across three general classes: Domestic Equity, International Equity, and Bonds. The percentages within these asset classes are based on the classification determined through the Investor Profile. The "Prudent Portfolio" may be used with almost any fund family or variable insurance product. First, the program categorizes all of the fund choices within their appropriate asset class. The funds are then subject to a screening process that further scrutinizes them base on factors such as volatility, track record, and risk/reward ratios (based on our targets Beta's) to determine those funds that are the most preferred candidates for current investment. Only these funds that pass this screen may be used in the program. Limiting investments to such a preferred universe is designed to allocate your assets into the most desirable funds available according to Kensington Management's modeling system.

Target Beta's
Conservative: 125% of the 1-yr Bank CD rate
Moderate Conservative: 0.75
Moderate: 1.00
Moderate Aggressive: 1.20
Aggressive: 1.20+


Target Beta's will fluctuate overtime. Our Target Beta's (except the conservative model) are benchmarked against the S&P 500, which has a beta of 1.00. Accordingly, a fund with a 1.10 beta has performed 10% better than it's benchmark index-after deducting the T-bill rate-in up markets and 10% worse in down markets, assuming all other factors remain constant. A low beta does not imply that the fund has a low level of volatility, though; rather, a low beta means only that the fund's market-related risk is low. This Step determines how to position the portfolio, recognizing that changing economic cycles can cause investment styles to move in and out of favor. The "Prudent Portfolio" assesses each asset class to determine how to weight the portfolio. For domestic equity, the "Prudent Portfolio" determines allocations across styles (value, growth, blend) and market capitalization ranges (small, medium, large) based on current market conditions and momentum. For international equity, master geographic areas are analyzed (Europe, Asia, World, Japan, Foreign, Emerging Markets). With bonds, similar analysis determines the most appropriate bond types for investment. For each of these master areas, investors are diversified in up to three asset classes and account size determines the number of positions held.

Domestic Equity			International Equity		Bonds
Large Cap Value	Large Cap Blend	Large Cap Growth	Foreign	World	Short Term High Quality	Int. Term High Quality	Long Term High Quality
Large Cap Value	Large Cap Blend	Large Cap Growth	Europe	Asia	Short Term High Quality	Int. Term High Quality	Long Term High Quality
Large Cap Value	Large Cap Blend	Large Cap Growth	Europe	Asia	Short Term High Quality	Int. Term High Quality	Long Term High Quality

Not all asset classes or styles move in lock step. When one area of the market is going down, another may be going up. The "Prudent Portfolio" seeks to identify and valuate the various styles of investing. The "Prudent Portfolio" goal is to keep you invested in the sectors that are moving up (positive momentum) and avoid the sectors that are moving down (negative momentum). The "Prudent Portfolio" now fills the Dynamic Allocation determined in Phase 4 with the selected funds according to Kensington Management's analysis, determined by the fund selection process in Phase 3. The"Prudent Portfolio" may use up to three funds within each asset class attempting to capture the most favorable areas of the market. The result is a Professional Allocation plan that is tailored to your specific investment goals. It uses a highly disciplined process that seeks to invest in the top ranked-screened funds - weighted in the most advantageous way for current market conditions. An important part about the process is that it doesn't stop with the initial allocation. Your portfolio should benefit from active fund selection and dynamic allocation. Also, your assets will be rebalanced to their target allocations based on your investor profile. Further, should a particular fund fail to continue to meet Kensington Management's criteria, it will be replaced within your allocation. In these ways, the program never stops working for you.