Investment holdings are monitored continuously to ensure that each security’s investment fundamentals are maintained. The ongoing search for new ideas may lead to the exchange of an existing holding for a more attractive opportunity. In addition to discretionary exchanges, NorthStar also enforces a disciplined selling methodology to seize gains when appropriate and limit downside exposure.

The Upside Sell Discipline

When a stock is added to the portfolio, an initial position of 1½% to 2% is established. As the stock appreciates in value and reaches a point where the position exceeds 4% of the portfolio, its valuation is carefully reviewed for a possible reduction or elimination of the position.

In the event of a significant price decline, reflecting adverse economic, industry or company-specific conditions, the stock’s fundamentals and our assumptions are re-evaluated. If a stock’s value declines by 20% from the price on the date it was approved by NorthStar's investment committee, its fundamentals are automatically reviewed. If the price declines by 20% both from its purchase price and by 20% relative to the S&P 500, the holding is placed into consideration for possible sale. The 20/20 rule serves as a mechanism to limit downside exposure.