The objective of this Core 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.
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:
- The Momentum Effect - In a broad universe of candidates, the
strongest performers tend to remain strong performers
- The Yield Effect - In a limited-candidate universe of large capitalization
stocks, the highest yielding stocks tend to become superior
performers
- 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
Combining the three sets of buy/sell disciplines exploiting these anomalies
produces consistently superior investment returns.
Consistent with the investment philosophy of Growth & Value 20, portfolios
typically consist of 20 stocks in three independently managed groups:
The five-stock Momentum Group is selected from the entire S&P 500 on the
basis of superior corporate and stock-price performance. Group stocks are
held only as long as they remain superior performers. The 10 Yield Group
stocks are selected from the 75-candidate Nottinghill LARGCAP Universe on
the basis of high dividend yield; each Group stock then is sold only when its
yield is no longer competitive. Finally, the five-stock Contrarian Group also
is selected from the LARGCAP Universe, in this case on the basis of multiyear
underperformance. The Group then is held for a multi-year period of
recovery. During certain periods of above-average stock market risk, which
are determined objectively, intermediate-term Treasuries are held instead
of the growth-oriented Momentum Group. Equities, therefore, constitute
75-100% of the portfolio, and utilizing multiple Growth and Value disciplines
to select those equities results in a more consistent pattern of superior
investment returns.
Nottinghill results are presented net-of-the management fee; all annualized returns are associated with time
periods ending December 31, 2009
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Nottinghill Investment Advisers, Ltd., has prepared and presented this report in compliance with the Performance
Presentation Standards of the Association for Investment Management and Research (AIMR-PPS™) for the
period from July 1, 1996 to December 31, 2005 and the Global Investment Performance Standards (GIPS®)
beginning in 2006. 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 AIMR-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 Growth & Value 20 performance composite (Composite A: all non-wrap fee accounts and those with a
fixed annual broker charge less than 0.25% of assets) officially was created on January 1, 2002; however, the
composite as currently defined has an effective date of compliance with the AIMR-PPS™ of January 1, 1997.
Berge & Company, Ltd. and BKD, LLP, Certified Public Accountants in each case, completed Performance
Examinations of the investment results presented for, respectively, the 1997-2001 and 2002-2008 periods. On
December 31, 2009, accounts with a fixed annual brokerage charge less than 0.25% of assets contained 56%
of total composite assets. The purpose of this fee is to cover trading costs.
3. No segments of other portfolio composites are included in the Growth & Value 20 composite.
4. The most appropriate benchmark for the Growth & Value 20 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 is 1.0% of the first $1 million, 0.75% of
the next $14 million, 0.65% of the next $35 million, and 0.50% of the next $50 million.
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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