Regular portfolio review forms an essential part of active fund management. For investors in the Capstone Biblically Informed Canadian and U.S. Equity Funds, understanding what the investment team monitors, how the BIO Committee operates, and what to expect from ongoing communication helps set appropriate expectations about active management with biblical research criteria.
This article provides educational information about the portfolio review process. Investors should consult fund facts and quarterly commentary for the latest fund information.
What Active Management Means in Practice
Active management involves ongoing analysis, monitoring, and decision-making about portfolio holdings. This continuous process distinguishes actively managed funds from passive index approaches.
Continuous Monitoring: The Portfolio Managers and biblical research analysts monitor portfolio companies continuously. Financial monitoring examines company earnings reports, business developments, industry conditions, and valuation changes. Values monitoring tracks corporate actions, policy changes, and new information relevant to Christian values alignment.
Both dimensions require active attention because companies evolve continuously.
Why This Matters: Active monitoring allows the investment team to respond to changes affecting either financial merit or values alignment. Companies failing to maintain standards in either category can be sold. Companies improving may receive larger allocations.
Investors should understand that active management involves portfolio changes as part of the ongoing process. Turnover occurs when companies no longer meet the criteria, when intrinsic value is reached, or when better opportunities emerge.
The Three Dimensions of Portfolio Monitoring
Financial Performance Monitoring: The Portfolio Managers track revenue and earnings growth, profit margins and cash flow generation, balance sheet strength and debt levels, and competitive positioning within industries.
Companies must continue demonstrating the financial characteristics justifying their inclusion. Deteriorating financial performance may trigger a holdings reassessment.
Business Development Tracking: The investment management team monitors new product launches or service offerings, acquisitions or divestitures, management changes, strategic direction shifts, and regulatory or legal developments.
These business developments can affect both financial prospects and values alignment.
Values Alignment Monitoring: The dedicated biblical research analyst continuously monitors portfolio companies for corporate actions affecting values alignment, policy changes related to Four Guiding Investment Principles, controversies or concerns, and changes in business models or revenue sources.
The partnership with Brightlight Impact provides additional perspective on values-related developments.
Portfolio Changes: When and Why Holdings Adjust
Active management involves portfolio changes as companies enter or exit based on evolving circumstances.
Adding Holdings: New holdings enter portfolios when companies meet both financial and biblical research criteria through fundamental financial analysis by Portfolio Managers, biblical research by the dedicated analyst, Brightlight Impact consultation, and BIO Committee review and approval.
Removing Holdings: Holdings exit portfolios when financial deterioration makes companies no longer attractive investments, valuation changes mean companies become too expensive, business developments create value alignment concerns, or portfolio rebalancing requires position adjustments.
Rebalancing and Position Sizing: Beyond additions and deletions, position sizes adjust through rebalancing. Companies performing well grow within portfolios. The team may trim positions grown too large or add to positions offering attractive valuations.
BIO Committee Activity: Governance in Practice
The Biblically Informed Oversight Committee provides structured governance for values-related investment decisions.
Committee Composition: The BIO Committee comprises four members with 100+ years of combined investment experience evaluating companies from biblical perspectives. The committee includes one independent member external to Capstone Asset Management, providing accountability and independent judgment.
Meeting Frequency: The BIO Committee meets regularly to review potential holdings and assess ongoing portfolio company developments. Meeting frequency ensures timely evaluation while allowing thorough consideration of complex cases.
Review Process: When the committee convenes, the biblical research analyst presents research on companies requiring review. Committee members examine the analysis against Four Guiding Investment Principles, discuss complex cases, raise concerns, and vote on whether companies meet the criteria for inclusion or continued holding.
This structured process provides checks and balances, ensuring no single person makes unilateral values-related decisions.
Biblical Research Updates: Continuous Values Monitoring
Monitoring Portfolio Holdings: The biblical research analyst tracks portfolio companies continuously for corporate actions affecting values alignment, policy announcements relevant to Four Guiding Investment Principles, news reports or controversies raising concerns, and changes in business operations or revenue sources.
Information Sources: Biblical research draws on corporate disclosures and filings, sustainability reports, news media, third-party research from Brightlight Impact, and industry publications.
Responding to Developments: When monitoring identifies potential concerns, the research process investigates further, consults Brightlight Impact for an independent perspective, and brings matters to the BIO Committee if warranted.
What Investors Receive: Quarterly Communication
Fund Facts: Updated fund facts provide current information about fund objectives, performance, fees, and holdings. These regulatory documents offer standardized disclosures.
Quarterly Commentary: Subscribers receive quarterly commentary providing portfolio updates, market context, investment team perspective, and discussions of changes or developments affecting the funds.
Holdings Disclosure: Portfolio holdings are disclosed quarterly with a lag. Full holdings lists show what companies the funds own, allowing investors to understand portfolio composition.
Performance Reporting: Performance data becomes available as the funds build operating history. Early periods following the October 30, 2025, launch provide limited performance data.
Setting Appropriate Expectations
Time Horizon: Meaningful performance assessment requires longer time horizons, allowing the investment approach to demonstrate results through various market conditions. Investors should maintain a long-term perspective appropriate to equity investing.
Volatility: Equity funds experience market volatility. Short-term fluctuations are normal.
Tracking Difference: Both funds will perform differently than broad market indices due to active management and biblical research criteria creating different holdings. This tracking difference is inherent in active management.
Ongoing Communication: Regular quarterly updates keep investors informed about portfolio management, market conditions, and fund developments. Reviewing these communications helps investors understand how the investment process operates.
Questions Investors Should Ask
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How have portfolio holdings changed since last quarter?
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What drove major additions or removals?
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Did the BIO Committee review any companies for values alignment concerns?
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How is the fund positioned relative to market conditions?
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Are there any changes to the investment team or research process?
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How does recent performance compare to expectations given the investment approach?
Accessing Fund Information
Download the Fund Facts and Prospectus or contact Capstone at 1.855.437.7103 with questions about fund operations, holdings, or investment process.
Conclusion
Active management with biblical research criteria involves continuous monitoring of both financial performance and values alignment. The investment team, biblical research analyst, and BIO Committee work together to ensure holdings meet ongoing standards for financial merit and Christian values alignment.
Regular quarterly communication keeps investors informed about portfolio management and fund operations. Understanding what active management entails helps investors set appropriate expectations and evaluate whether the funds continue serving their investment objectives.
For more information or to subscribe to quarterly commentary, visit capstoneassets.ca or call 1.855.437.7103.
*Important Disclosures: Commissions, trailing commissions, management fees, and expenses may be associated with investments in mutual funds and exchange-traded funds. Please read the prospectus before investing. Mutual funds and ETFs are not guaranteed; their values change frequently, and past performance may not be repeated. The simplified prospectus, fund facts, and ETF facts are available on SEDAR+ at www.sedarplus.ca or consult with a registered investment dealer or advisor.