The primary objective of this Core-Satellite approach is to provide over the life of
the Strategy and over every three-year period an investment return superior to that
of the S&P 500 Index. Secondary objectives are returns that are highly correlated
with those of the Index and transaction costs and management fees that are well
below-average.
The Efficient Market Hypothesis (EMH), which questions the ability of active equity
management to outperform the market indexes on a consistent basis, is largely
valid; however, there are three exploitable anomalies within the EMH:
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The Yield Effect - In a limited-candidate universe of large capitalization
stocks, the highest yielding stocks tend to become superior performers
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The Contrarian Effect - In a limited-candidate universe of large capitalization
stocks, the worst multi-year performers tend to become superior performers
over the subsequent multi-year period
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The Momentum Effect - In a broad universe of candidates, the strongest
performers tend to remain strong performers
Combining the sets of buy/sell disciplines exploiting the Contrarian Effect and the
Momentum Effect with those of an S&P 500 index fund produces consistently superior
investment returns, which are highly correlated with those of the S&P 500 Index.
Transaction costs and management fees are well below-average.
The sets of buy/sell disciplines exploiting two of the above anomalies govern two
five-stock groups, the Contrarian Group and the Momentum Group. They come together
to form a Concentrated Value Plus sub-portfolio, which contains 25% of Enhanced
Index assets. The remaining 75% is invested in an S&P 500 index fund.
The patterns of the Contrarian and Momentum Group returns are entirely different.
The Contrarian stocks are selected from the 75-candidate Nottinghill LARGCAP Universe
on the basis of multi-year underperformance. The Group then is held for a
multi-year period of recovery. The Momentum Group stocks are selected from the
S&P 500 on the basis of superior performance, and are held only as long as they remain
superior performers. The role of the Groups is the same: to participate fully
during favorable market periods. Furthermore, the use of multiple sets of buy/sell
disciplines results in a more consistent pattern of superior returns. At the same time,
the large index fund component ensures that total portfolio performance remains
highly correlated with that of the S&P 500 Index and that fees and expenses are low.
Nottinghill results are presented net-of-the management fee
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PERFORMANCE DISCLOSURE STATEMENT
Nottinghill Investment Advisers, Ltd., has prepared and presented this report in compliance with the Global
Investment Performance Standards (GIPS®). No regulatory or governing body has been involved in the preparation
or review of this report.
1. Nottinghill Investment Advisers, Ltd., (“Firm”) is an independent, SEC-registered investment adviser
utilizing a number of primarily large capitalization equity investment strategies. Berge & Company, Ltd., and
BKD,LLP, Certified Public Accountants in each case, completed Firm-wide Verifications of Nottinghill’s
compliance with the AIM®-PPS™ for, respectively, the 1996-2001 and 2002-2005 periods. The Verifications
associated with years after 2005 also were completed by BKD, LLP, and tested Nottinghill’s compliance with
the aforementioned Global Investment Performance Standards (GIPS®). Verifications are conducted annually;
a copy of the most recent report is available by request.
2. The Enhanced Index performance composite (Composite A: all non-wrap fee accounts and those with a
fixed annual brokerage charge less than 0.25% of assets) was created on January 1, 2009.
3. No segments of other portfolio composites and no accounts with a fixed annual broker charge are included
in the Enhanced Index composite.
4. The most appropriate benchmark for the Enhanced Index strategy is the S&P 500 Index, an unmanaged,
capitalization-weighted index of primarily U.S. corporations. Index performance includes price change and
income, however, the Index has no expenses. The S&P 500 Index has been the benchmark since inception.
5. Investment results have been calculated net-of-the management fee, which was deducted from the results
achieved by every account in the composite. The annual fee schedule associated with the Actively Managed
Equity Component is 1.0% of the first $1 million, 0.75% of the next $4 million, and 0.50% of remaining assets.
The annual fee schedule associated with the Indexed Component is 0.25% of assets
6. Investment results calculated net-of-the management fee are appropriate for presentation or redistribution
in all settings, but must be accompanied by this disclosure language.
7. All performance calculations are based upon trade-date accounting, and, except where otherwise noted,
are associated with time periods ending December 31.
8. Performance is expressed in U.S. Dollars.
9. Annual composite dispersion is the asset-weighted standard deviation of gross investment returns.
10. Exchange-Traded Fund shares may be utilized in this strategy from time to time. No other derivatives
and no leverage are employed.
11. Past performance is no guarantee of future results.
12. A complete list of Nottinghill performance composites and additional information regarding the calculation
and reporting of Nottinghill performance are available upon request.
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