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| Additional information |
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| Boston Harbor Investment Management LLC |
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Mission statement:
Boston Harbor Investment Management’s mission is to preserve and grow our client’s capital. Our goal is to provide our clients with a high degree of investment liquidity, at the same time generating long-term absolute returns significantly above the S&P 500 Total Return Index, with lower volatility-risk.
To accomplish our mission, Boston Harbor uses a fundamental, systematic, rules-based method to select a low-turnover stock portfolio of well-managed, healthy, large market capitalization companies with a high probability of sustainable earnings from a universe such as the S&P 500 Index. Boston Harbor’s rules-based method is proprietary, stable, and repeatable.
The method applies Boston Harbor’s thoroughly-tested mathematical analysis of published financial statements and other factors to identify well-managed, large-cap, investment targets with healthy and sustainable financial results. Boston Harbor seeks to preserve and grow our client’s capital by investing in those companies. |
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Overview:
William F. Sharpe, 1990 Nobel Prize winner for his theory of risk and return, precisely states our belief about the work to be done before offering any investment strategy to our clients: "Although it is always perilous to assume that the future will be like the past, it is at least instructive to find out what the past was like."
We are about using our proprietary Microeconomic Theory of the Firm to create validated systematic investment strategies. All of our strategies will show our clients hypothetical performance over market cycles using the scientific method of first developing a hypothesis and then rigorously back-testing that theory using SEC Form 10-K fundamental data.
Our first investment strategy, SELECT 40 (40 S&P 500 Index stocks), went live on April 1, 2013. The live composite returns have closely tracked the hypothetical returns for that period. Since inception on March 1990, a hypothetical $10,000 invested in SELECT 40 grows (net of management fee and transaction cost of 1.21%) to $187,872 as compared to $102,432 for the S&P 500 Total Return Index.
SELECT 40 Total Return Strategy provides our clients with the opportunity to profit from one of the greatest anomalies in finance: the long-term success of low-volatility and low-beta portfolios. Contrary to basic finance principles, high-beta and high-volatility stocks have long underperformed low-beta and low volatility stocks. Over 1968-2008, low-volatility and low-beta portfolios offered an enviable combination of high average returns and small drawdown’s. This outcome runs counter to the fundamental principle that risk is compensated with higher expected return.¹
Our Strategy’s risk-adjusted returns are about double the S&P 500 Total Return Index over the past two decades. The Strategy’s phenomenon of higher than market returns for less than market risk was confirmed in 2011 by the independent third party research of Malcolm P. Baker, Robert G. Kirby, Professor of Business Administration, Harvard Business School.
At Boston Harbor, we believe that large market capitalization companies, such as those included in the S&P 500 Index, constitute an excellent investment selection universe. To be included in such an index, companies have to possess both competitive advantages and the financial resources to survive difficult economic cycles. We believe that the market is reasonably efficient in setting the share prices of such securities, so we do not attempt to challenge their market valuations. Instead, we carefully analyze their financial statements to identify those that have fundamentals characteristics that indicate to us a likelihood of performing better than the expectations embedded in their market price. We use this unique, proprietary, analytical process to select portfolios of large-cap low volatility-risk stocks. In a 24.75 year study of SEC form 10-K fundamental data, the hypothetical returns of the selected stocks significantly outperformed the S&P 500 with lower volatility risk.
Boston Harbor does not believe that the investor must accept higher than market risk to obtain higher than market returns. |
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