Portfolio Revision | Strengthening Portfolio Construction in the New Capital Cycle
Over the past several weeks, the LSA Investment Policy Committee has completed its scheduled mid-year review across all mutual fund and ETF model portfolios. While these revisions were finalized more than 30 days ago, the committee intentionally delayed implementation as equity markets continued advancing toward new highs while market volatility remained elevated. Rather than introducing portfolio changes during a period of heightened uncertainty, the committee elected to remain patient and allow market conditions to normalize before implementing the previously approved revisions.
With volatility measures now moderating and trading conditions becoming more orderly, the committee believes the current environment provides a more appropriate opportunity to implement these enhancements. These updates are evolutionary rather than tactical in nature and are intended to strengthen long-term portfolio construction while maintaining each model’s stated investment objective.
The committee continues to believe investors have entered what we have referred to as The New Capital Cycle—an investment environment characterized by higher capital costs, elevated fiscal spending, persistent inflation uncertainty, accelerating infrastructure investment, increasing demand for artificial intelligence, and greater competition for capital across the global economy. While these structural forces continue shaping long-term investment opportunities, this revision cycle is focused less on broad asset allocation changes and more on refining portfolio implementation within that evolving backdrop.
Rather than representing a significant shift in investment philosophy, these revisions reflect the committee’s ongoing effort to align portfolios with the realities of the New Capital Cycle through disciplined manager selection, thoughtful implementation, and continuous portfolio improvement. In many cases, the changes are incremental by design, reinforcing our belief that long-term investment success is often achieved through consistent refinement rather than dramatic repositioning.
Model Update Schedule
Posted: July 7, 2026
Targeted Trade Date: July 13, 2026
- American Funds
- Bear Market Entry (BME)
- Cautious Bear Plus (CBP)
- Private Client
- Private Client Less Than $100k
- Private Client Traditional
Posted: July 8, 2026
Targeted Trade Date: July 14, 2026
- ETF Tactical
- ETF Models
- Private Client Blended
- Private Client Tax Efficient
Posted: July 9, 2026
Targeted Trade Date: July 15, 2026
- PC Income Strategy
- Private Client IQ
- Impact Series
- Fidelity
- Vanguard
Additional Updates
- Variable Annuity (VA) and Variable Universal Life (VUL) model revisions remain under committee review and will be released separately following completion of platform-specific analysis.
- Certain mutual fund revisions may also result in updates to associated Non-Transaction Fee (NTF) model portfolios.
- Individual portfolio revision summaries will be posted within the Portfolio News section of each platform homepage.
Investment Rationale
Strengthening Portfolio Construction in the New Capital Cycle
The investment landscape continues to evolve as markets transition away from the liquidity-driven environment that defined much of the post-financial crisis era. Today, investors face a world of structurally higher interest rates, elevated fiscal spending, persistent inflation uncertainty, growing infrastructure investment, accelerating artificial intelligence adoption, and increasing competition for global capital.
Collectively, these forces represent what the LSA Investment Policy Committee has described as The New Capital Cycle—a long-term investment framework that recognizes capital is no longer abundant or inexpensive, and that disciplined allocation decisions are becoming increasingly important.
One of the defining characteristics of the New Capital Cycle has been greater dispersion across sectors, asset classes, investment styles, and portfolio managers. As market leadership narrows and valuation differences widen, thoughtful manager selection and efficient portfolio construction become increasingly important contributors to long-term investment success.
While these structural trends continue to shape our long-term outlook, this revision cycle is focused primarily on refining portfolio implementation rather than making broad strategic allocation changes. Our objective remains straightforward: continuously improving each portfolio by identifying higher-conviction managers, strengthening implementation, improving efficiency, and maintaining disciplined diversification.
Core Themes Driving This Revision
1. Strengthening Manager Quality
As performance dispersion across investment managers continues to widen, manager selection has become an increasingly meaningful contributor to long-term outcomes.
Across multiple model series, the committee has conducted a comprehensive review of existing managers with an emphasis on identifying opportunities to improve:
- Long-term risk-adjusted performance
- Portfolio consistency
- Investment process durability
- Manager conviction
- Structural implementation
Several portfolios include targeted manager upgrades where the committee believes stronger long-term opportunities exist while maintaining each portfolio’s overall investment objective.
2. Improving Portfolio Efficiency
Many of this cycle’s revisions focus on improving how portfolios are implemented rather than materially changing their strategic allocations.
The committee has reviewed opportunities to:
- Reduce unnecessary overlap between investment managers
- Simplify portfolio construction
- Improve diversification efficiency
- Utilize more effective investment vehicles where appropriate
- Lower investment costs without sacrificing portfolio quality
These enhancements are intended to create cleaner, more efficient portfolios while preserving each model’s long-term philosophy.
3. Refining Fixed Income Positioning
In a world where capital once again carries a meaningful cost, fixed income has reemerged as an important source of income, diversification, and portfolio resilience.
The committee continues evaluating:
- Credit quality
- Duration management
- Income sustainability
- Active versus passive implementation
- Relative value opportunities across fixed income sectors
Although yields remain attractive, the committee remains focused on avoiding uncompensated credit and duration risk while maintaining resilient income-producing allocations capable of supporting portfolios throughout varying market environments.
4. Reviewing Hedged Equity and Option-Based Strategies
The committee continues evaluating hedged equity, buffered outcome, and option-based investment strategies to ensure these allocations continue providing meaningful value within diversified portfolios.
Current reviews focus on balancing:
- Downside protection
- Participation during rising markets
- Overall portfolio efficiency
- Cost relative to realized benefits
Where appropriate, refinements have been made to ensure these strategies continue serving their intended role within the broader portfolio.
5. Maintaining Selective Global Diversification
As infrastructure investment, manufacturing expansion, supply chain realignment, and capital spending become increasingly global, selective international diversification remains an important component of long-term portfolio construction.
The committee continues emphasizing:
- Higher-quality international managers
- Improved factor implementation
- Select emerging market opportunities
- Structural global growth themes
- Efficient international diversification
International exposure remains measured and intentional, emphasizing quality and long-term opportunity rather than broad benchmark replication.
6. Ongoing Monitoring of Private Credit
The committee continues monitoring developments within private credit and other less-liquid investment structures. While these revisions contain relatively few direct changes in this area due to the limited exposure currently maintained across LSA portfolios, we remain focused on evaluating:
- Liquidity characteristics
- Portfolio transparency
- Valuation discipline
- Structural complexity
- Long-term suitability within diversified portfolios
As this market continues evolving, the committee will remain disciplined in determining where these strategies may—or may not—fit within future portfolio construction.
The New Capital Cycle is not intended to predict short-term market movements. Rather, it serves as the Investment Policy Committee’s long-term framework for evaluating structural investment trends, identifying where capital is likely to earn the highest long-term risk-adjusted returns, and continuously refining portfolios as new opportunities emerge.
This revision cycle represents another step in that ongoing process.
The committee remains committed to:
- Building resilient portfolios capable of navigating changing market environments.
- Maintaining exposure to our highest-conviction investment ideas.
- Continuously evaluating managers and implementation vehicles.
- Improving portfolio efficiency where opportunities exist.
- Preserving disciplined diversification and thoughtful risk management across every model series.
While markets will inevitably experience periods of optimism and uncertainty, our investment philosophy remains unchanged. Through disciplined research, active oversight, and continuous refinement, the LSA Investment Policy Committee believes investors are best positioned to navigate the opportunities and challenges presented by the New Capital Cycle.
LSA Connect 