SDI's Investment Process is based upon proven academic research and direct market experience. The firm's employs a consistent, repeatable investment process that utilizes a proprietary, multi-factor quantitative model based upon the Arbitrage Pricing Theory ("APT"). The model incorporates value and return momentum factors to calculate alpha and identify those stocks that are likely to outperform the market. A statistical analysis is used to determine risk characteristics such as beta and residual volatility. Portfolio constraints for regions, sectors, market-capitalization and position sizes are used to mitigate undue risk and ensure proper diversification. The model conducts a Principal Components Analysis to determine which risk factors contain the most explanatory power and result in 5 APT beta factors. These beta factors which incorporate multiple sources of risk are the cornerstone of SDI's risk controls. The model optimized portfolio is then subjected to a fundamental review by the Portfolio Manager to reflect factors not detected by the model that may negatively impact a client's portfolio. These non-measurable factors include current market liquidity, fund flows, changes in volatility, current news or events, top-down industry trends, political unrest or natural disasters. Only a small percentage of all model recommended transactions are actually overridden, and in aggregate, the judgmental overlay accounts for less than 10% of the investment process value added.