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In 1974 as a new experiment in portfolio management, The Equitable Life Assurance Society of the United States selected a young team of men and women to take a new concept, the Capital Asset Pricing Model (or CAPM), fresh out of academia, and develop an application for solving some of the challenges facing the explosion of retirement accounts and assets.  This development was influenced in large part from the population growth of baby boomers entering the workplace along with the passage of ERISA legislation (The Employee Retirement Income Security Act of 1974). 

​This young group ushered in a new era in pension fund asset management that grew rapidly.  Quantitative Portfolio Management was off and running. It allowed continuity in the management of investment strategies across a large volume of investors and could accommodate an infinite number of corporate clients.

Steve Scott was on this team of young professionals and saw the potential for taking this new methodology to main street by way of the retail mutual fund industry. Steve saw its development as a fusion between the traditional fundamental approaches to investing and the new quantitative market theories.  He decided to design his own version and branded it the "Scott Asset Management Methodology" or "SAM".  He outlined it in a paper published in 1982 titled "The Optimal Trust Company." Steve's article described the basis for the new approach to investing as derived from a Nobel Prize-awarded financial theory known as CAPM. This theory argued that if the equity markets were efficient and not able to be consistently "gamed" or outperformed, then managing risk required another component. Steve considered the “Diversification Hypothesis” a long accepted theory (also winning a Nobel prize) that premised diversification as a risk inhibitor.    Scott argued that combining different classes of assets not well correlated could provide an optimized investment mix around any set of policy parameters. He saw the promise of the new computing technology of data analysis providing the ability to examine a multitude of different portfolio compositions to be matched against different levels of risk. 

​Mr. Scott soon left Equitable to start Scott, DiNino and Smathers (which today is part of the private wealth management division of Morgan Stanley) in an effort to pioneer his vision of bringing the newly developed asset allocation methodology to the retail market.  The new Company developed a signature service that searched for low cost mutual fund families, that managed a variety of different asset classes (i.e. Vanguard).   Their allocation techniques were applied to specific mutual funds within pre-selected fund families by using new optimization algorithms that allowed for matching risk and return. This was a major success. By 1988 quantitative management and asset allocation were accepted across the industry.

Great Western Financial invited Mr. Scott to build a startup investment management division that would include a new family of mutual funds centered around this new application of portfolio management. As President, CEO & CIO, he selected Patrick Hook to be head of Research and Portfolio Management to build this organization.  In two years they launched the Sierra Trusts Funds utilizing the SAM methodology as its centerpiece in 1990.  The Sierra Trust Funds complex became the fastest growing family of funds in the history of the industry. It began operations with no assets under management but grew assets to reach $26 billion over a period of 8 years.  

In 1997, Great Western was purchased by Washington Mutual (WAMU).  All senior management elected to leave after the transaction was completed except Mr. Scott and his team.  Following the successful consolidation of Great Western Financial and Ahmanson Bank (Home Savings of America) by WAMU, SAM management operations continued to thrive.  In 2000, Mr. Scott elected to leave along with Patrick Hook in order to build the present company, Scott Investment Advisors, L.P. (SIA).  Ironically the first client of the new company was the WAMU fund group while a new platform and technology upgrades were being built. SIA later terminated the WAMU relationship. 


As SIA began operations, a new design of the methodology called for utilizing only low cost indexes and Exchange Traded Funds (ETF's) rather than working with particular fund families as before.  SIA advanced and refined the SAM methodology, building on prior developments.  Today the old SAM (Strategic Asset Management) Portfolios developed at Great Western, and later acquired by WAMU, were sold prior to   WAMU's bankruptcy during the 2008 Great Recession.  The funds continue to thrive to this day, now representing the signature product line of the Principal Insurance Group.   




Three Simple Steps

​Step 1.  Use our tool "Personal Risk Profiler" to quantify and score your risk profile.

Step 2.  Use our "Portfolio Strategy Selector" to match one of the SAM Portfolios.

Step 3.  Use our Knowledge Base for performance tracking and ongoing reassessments.


"All Long Hedge Fund Management" at SIA means: among a very large population of securities, the identification of a statistically significant sub-population that are not all correlated (that don't move in parallel to each other, which thus provides a hedging mechanism).  Then using intelligent technology create a mix when combined together, possesses optimal risk/return characteristics of a superior nature as compared to those of the individual securities within the sub-population.

The effort to create a bridge from  academia to the applied world was a challenging task. Steve Scott began this journey in 1974 with The Equitable, as chronicled in "Our Story" above.   As an insurance company, Equitable was by law allowed to create "Pooled Separate Accounts"  (the same concept as a mutual fund but available only to institutions).  Ten such "pools"  were created from stocks, bonds, real estate, etc. Each had their own unique characteristic and were readily sold to pension funds.  As an example, IBM already had a large pension portfolio, but which didn't include real estate investments. In this case, the characteristics of the separate Real Estate Account fit very well within their portfolio. The  learning curve was rapid and it became obvious that we needed to create a mechanism to utilize these pooled accounts by combining them in a way that was in harmony with the liabilities of the pension plan. In other other words this methodology would thus allow for lowering the cost of the plan without excessive risk to the liability (payment obligations) needs if an optimal mix was discovered.   

Mr. Scott had been a part of a new team of young investment professionals that created  a structure that could deliver uniform management and consistent results that were in harmony with the risk/return characteristics of each pension plan.  The applications have become more sophisticated and complex today. Hedge funds have parsed into many different types. Some will exercise short selling and thus be a Long Short fund, some will exercise going All Short and there are many varied approaches utilizing significant leverage. SIA has remained All Long over the years, electing to remain in our comfort zone.  This new field of investment management became known as  ​​Asset Allocation, which today has become a household word.

Unbeknownst to Mr. Scott during the years at the Equitable, his future partner, Patrick Hook, was working in the Pension Investment Division at the Prudential, helping to build their Pooled Funds complement. They also were engaged in an effort to incorporate these new theories and technologies into their management operation.   

During the first 5 years of its inception at Great Western Bank, The Sierra Trust Funds became the most successful new fund family in the history of the industry. The Sierra Trust Funds was awarded the coveted Barrons  "Top Fund Family of the Year." 

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