NorthCoast Growth. Investor Presentation NORTHCOASTAM. COM

Transcription

1 NorthCoast Growth Investor Presentation NORTHCOASTAM. COM

2 N ORTHC OAST A SSET M ANAGEMENT EXPERIENCE Based in Greenwich, CT $1.8 billion in firm AUM (as of 6/30/2018) 30+ Professionals STABILITY 100% proprietary research, trading, and management Systematic and rules-based investment execution Daily risk controls that proved their mettle in drawdowns of and 2008 PERFORMANCE Exclusive Agreement with Investor s Business Daily ETF Partnership with BlackRock ishares Recognized as a Financial Times Top 300 Registered Investment Adviser (2014, 2015) ishares and BlackRock are registered trademarks of BlackRock, Inc. and its affiliates ( BlackRock ) and are used under license. BlackRock makes no representations or warranties regarding the advisability of investing in any product or service offered by NorthCoast Asset Management LLC. BlackRock has no obligation or liability in connection with the operation, marketing, trading or sale of any product or service offered by NorthCoast. The 2015 Financial Times Top 300 Registered Investment Advisors is an independent listing produced by the Financial Times (June, 2015). The FT 300 is based on data gathered from RIA firms, regulatory disclosures, and the FT s research. As identified by the FT, the listing reflected each practice s performance in six primary areas, including assets under management, asset growth, compliance record, years in existence, credentials and accessibility. Neither the RIA firms nor their employees pay a fee to The Financial Times in exchange for inclusion in the FT

3 I NVESTMENT P HILOSOPHY We believe disciplined, data-driven investing outperforms intuition over time We utilize comprehensive data sets to discover, interpret and leverage valuable patterns and trends. Market exposure model utilizes 40+ signals to identify optimal market exposure in changing environments Multi-factor stock selection model seeks the top risk-adjusted exposures to meet specific investment objectives Years Asset Allocation Strategy* Long/Cash Equity Portfolio (mutual funds) -4.4% (vs % S&P 500 Index) Year 2008 CAN SLIM Investment Strategy Long/Cash Equity Portfolio (individual stocks) -12.8% (vs % S&P 500 Index) PAST PERFORMANCE DOES NOT GUARANTEE OR INDICATE FUTURE RESULTS. *Performance results for Asset Allocation and CAN SLIM are historical net results and shown for informational purposes only. Asset Allocation investment strategy is no longer offered by NorthCoast Asset Management. Please reference Appendix for additional disclosure information. 3

4 I NVESTMENT T EAM Patrick Jamin CFA, FRM Chief Investment Officer Julia Zhu CFA, FRM SVP Market & Security Research Yaqiu Li SVP Portfolio Construction Slava Malkin Senior Vice President Partner, Numeric Investors (European / World Fundamental Statistical Arbitrage) Partner, Portfolio Manager, Standard Pacific Capital; Global Long/Short Equity Fund Senior Quantitative Analyst, Invesco; Global Quantitative Fund M.B.A., Harvard Business School, Baker Scholar, Arthur Sachs Scholar M.S. Telecommunications, Ecole Nationale Superieuredes Telecommunications de Paris Ingenieur de I Ecole Polytechnique, Ecole Polytechnique Vice President, Research Affiliates - Quantitative research; equities and asset allocation Associate, First Quadrant Conducted research on GTAA and tactical currency allocation Master of Economics, Yale University, PhD Candidate M.B.A. with concentration in Finance, University of Southern California Climate Modeling National Key Lab of Atmospheric Science, Chinese Academy of Sciences M.S. Quantitative and Computational Finance & M.S. in Statistics, Georgia Tech PhD Candidate CFA Level III Candidate Quantitative currency trading strategies BNP Paribas Portfolio Manager of global macro strategies Research in Global Tactical Asset Allocation strategies Deutsche Asset Management M.S. in Statistics, Harvard University Jason Krugly Vice President Research experience with Bank of America, Merrill Lynch, Credit Suisse, Deutsche Bank M.S. in Financial Engineering, Baruch College B.S. & M.S. in Computer Science, Polytechnic Institute of New York University Sumanth Amarchinta Vice President Senior Investment Analyst, Pyramis Global Advisors - Quantitative research M.S. in Computer Engineering, Rochester Institute of Technology B.S. in Electrical Engineering, Roorkee Indian Institute of Technology 4

5 H EADLINES 5

6 W HITEPAPER: LONG/CASH E QUITY S&P500 HFRI Equity Hedge Return 18.2% 23.7% Volatility 13% 9% Drawdown -15.4% -9.0% Correlation 100% 65% Beta S&P500 HFRI Equity Hedge Return -0.9% 5.4% Volatility 16.1% 9.2% Drawdown -50.9% -30.6% Correlation 100% 74% Beta S&P500 HFRI Equity Hedge Return 13.2% 5.1% Volatility 11.9% 6.9% Drawdown -16.5% -13.2% Correlation 100% 90% Beta Month Beta 12/31/ /31/ HFRI Equity Hedge HFRI MN HFRI Short Biased (0.50) (1.00) NorthCoast Long/Cash Equity Whitepaper June 2016 (1.50) (2.00) Past Performance is not indicative of future results. All investments involve risk, including loss of principal. Source: Bloomberg, HFRI 6

7 L ONG/CASH E QUITY Equity Exposure Level 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% NorthCoast Long/Cash Equity vs. HFRI Equity Hedge Hypothetical Growth of $100,000: 1/1/2007-6/30/2018 Equity Exposure NorthCoast Long/Cash Equity HFRI Equity Hedge 0% $250,000 $225,000 $200,000 $175,000 $150,000 $125,000 $100,000 $75,000 $50,000 Growth of $100,000 Annualized Return Risk Metrics vs. S&P 500 Comparative Risk Metrics NorthCoast HFRI Equity 1/1/2007 6/30/2018 Long/Cash Equity Hedge Index 1-Year 17.2% 8.2% 3-Year 8.3% 4.9% 5-Year 10.3% 5.8% Since Inception (2007) 7.8% 3.8% Beta R2 60.9% 75.4% Correlation Standard Deviation 10.3% 8.3% Sharpe Ratio Max Drawdown -19.6% -30.6% Equity Hedging Simplified Whitepaper February 2018 The NorthCoast Long/Cash Equity returns referenced in this document are the actual performance results of the NorthCoast CAN SLIM Investment Program. 7 Past Performance is not indicative of future results. All investments involve risk, including loss of principal. Results are presented net of a 0.65% annualized management fee.

8 N ORTHC OAST G ROWTH Over the past decade, NorthCoast has evolved as a result of investor demand and expanded its separately managed account offerings. Transparency Access to daily holdings and transactions Liquidity Managed account structure offers access to capital without lockups Customization Ability to customize portfolio based on risk exposures, investor mandate, or risk/return attributes. Cost Provide a low cost option giving clients a true alignment of interests Hybrid Bridging the gap of simply choosing between a long-only manager and a Long/Short Manager 8

9 I NVESTMENT P ROCESS NorthCoast applies a multi-step investment process to construct, manage and implement its portfolio solutions. Market Outlook Stock Selection Portfolio Construction Risk Management Proprietary market outlook determined by 40+ signals across four dimensions identifies opportunities & risks Daily market signal analysis Ongoing assessment of market signals ensures accuracy and relevance Rigorous research shows stocks tend to exhibit common characteristics before gains Daily scoring of 3,000+ stocks with 20+ signals Seek stocks with superior risk-adjusted potential Dynamic optimizer properly maintains riskadjusted portfolios daily Assessment of total transaction costs and estimate of implementation shortfall Higher concentrated portfolios enhance long-term alpha Proprietary risk model Controls embedded throughout investment process Combination of active and passive risk management methods Daily monitoring of positions 9

10 D YNAMIC M ARKET E XPOSURE Market outlook determined by 40+ signals across four dimensions identifies opportunities & risks to determine exposure TECHNICAL Momentum Reversal Fear SENTIMENT Consumers Producers Credit Surprise MACRO- ECONOMIC Leading Indicators Federal Reserve Jobs Geopolitical VALUATION Historical Forward Rate Adjusted Inflation Adjusted 100% NorthCoast Equity Exposure Model 1/1/ /31/2017 Technicals Sentiment Macroeconomic Valuation 90% 80% Equity Target Level 70% 60% 50% 40% 30% 20% 10% 0% The chart above shows a hypothetical simulation of NorthCoast s proprietary market outlook analysis tool. This simulation is generated by using multiple data points across four broad dimensions including Technical, Sentiment, Macroeconomic, and Valuation indicators. The daily result determines equity exposure. It does not represent actual equity exposure. 10

11 S CORING S TOCKS We believe underlying factors drive a stock s future performance (positive or negative). Our research focuses on identifying these factors. We utilize 21 individual data points across 7 broad categories. Hypothetical Stock A Example Category Score Weighting Factor Category Score Example Factor Valuation Comprehensive Value Sentiment Management Behavior Diffusion of Information Technical Institutional Attention 0.4 EBITDA trends vs. Enterprise value 2.4 Historical Earnings Yield relative to peer group 1.0 Earnings Estimates revisions 0.4 Stock buy-back or issuance 2.3 Stock price movement relative to information flow 1.0 Price trends in a 12 month window -0.7 Short borrowing activity Composite Score +2.1 Stock Score from -3 to +3 (on a relative scale) The example above shows a hypothetical score of NorthCoast s proprietary security selection tool. 11

12 S TOCK S CORING E XAMPLE Individual securities are for informational purposes only and not a recommendation to buy or sell these securities. The score-based model is a proprietary security selection system of NorthCoast Asset Management. Past performance is not indicative of future results. Data as of 4/19/

13 S TOCK S CORING E XAMPLE Individual securities are for informational purposes only and not a recommendation to buy or sell these securities. The score-based model is a proprietary security selection system of NorthCoast Asset Management. Past performance is not indicative of future results. Data as of 4/19/

14 C ONSTRUCTION & RISK M ANAGEMENT Systematic implementation coupled with daily oversight seeks to maximize risk-adjusted return Daily Oversight Sample Allocation Dynamic optimizer maintains risk-adjusted portfolio daily 0 # of Holdings current holdings Proprietary internal and external transaction cost controls Corporate action data to ensure integrity of inputs 2% Position Size 2.4% Average Weighting 4% Portfolio management validation of trade (data integrity, updated news, special situations) Daily portfolio rebalancing minimizes alpha decay Holdings-level transparency Reduce exposure when bear market risk is high Sector Allocation +/- 10% weighting within S&P 500 sectors Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Materials Information Technology Telecommunication Services Utilities Cash Portfolio data as of 6/30/

15 L ONG/CASH E QUITY T RACK R ECORD Year-by-Year Performance Results CAN SLIM (Net) S&P500 HFRI Equity Hedge Index S&P Put Option 70/30 S&P 500/Cash % 5% 10% 2% 4% % -37% -27% -9% -27% % 26% 25% 10% 18% % 14% 11% 6% 10% % 1% -8% -6% 1% % 15% 7% 6% 11% % 38% 32% 14% 20% 22% % 11% 13% 2% 9% 9% % -3% 1% -1% -6% 1% % 4% 11% 5% 6% 8% % 18% 21% 13% 14% 14% CAN SLIM NorthCoast Growth *In late 2012, we opened up the stock selection universe by eliminating the initial IBD 50 (composite rating) filter. The updated strategy was named NorthCoast Growth, launched in November The NorthCoast Long/Cash Equity returns referenced in this document are the actual performance results of the NorthCoast CAN SLIM Investment Program. Past Performance is not indicative of future results. All investments involve risk, including loss of principal. Results are presented net of 0.65% annualized management fee. Please reference the Appendix for additional disclosure information. Reference appendix for comparative benchmark information. Index Source: Bloomberg, HFRI. 15

16 N ORTHC OAST G ROWTH Equity Exposure Level 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% NorthCoast Growth Hypothetical Growth of $100,000: 11/1/2012-6/30/2018 Equity Exposure NorthCoast Growth HFRI Equity Hedge CAN SLIM 0% Nov-12 Jun-13 Jan-14 Aug-14 Mar-15 Oct-15 May-16 Dec-16 Jul-17 Feb-18 $200,000 $175,000 $150,000 $125,000 $100,000 Growth of $100, * YTD Total Thru 6/30/2018 NorthCoast CAN SLIM 3.3% 29.4% 13.1% -4.7% 3.8% 19.5% 6.1% 89.7% NorthCoast Growth 2.4% 37.7% 10.7% -2.9% 4.0% 17.6% 4.1% 92.8% HFRI Equity Hedge (Total) 2.1% 14.3% 1.8% -1.0% 5.4% 13.2% 1.2% 42.2% * 11/1/ /31/2012 Past Performance is not indicative of future results. All investments involve risk, including loss of principal. Results are presented net of 0.65% annualized management fee. Please reference the Appendix for additional disclosure information. Index Source: HFRI 16

17 N ORTHC OAST G ROWTH NorthCoast Growth Relative Performance to Competitive Benchmarks: (+, /, Underperformance) S&P 500 Tactical Competitors- Average HFRI S&P500 + Put Option 70/30 S&P/Cash % 29% 23% 18% 16% % 8% 9% 2% 2% % 3% -2% 3% -4% % -2% -1% -2% -4% % 5% 4% 4% 3% 2018 YTD 2% 5% 3% 3% 2% Average* -2% 9% 7% 5% 3% NorthCoast Growth outperformed competitive benchmarks by an annual average of 4% since *Average relative performance is calculated on full year performance only and excludes 2018 YTD. Past Performance is not indicative of future results. All investments involve risk, including loss of principal. Results are presented net of 0.65% annualized management fee. Please reference the Appendix for additional disclosure & benchmark information. Index Source: Bloomberg, HFRI. 17

18 N ORTHC OAST G ROWTH M ONTHLY Constructing an efficient Long/Cash equity portfolio Long-term track record, proprietary research and factor-based stock selection Systematically managing beta through factor-based research processes Maintaining low costs by avoiding operational complexities and fees associated with short positions Year JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YEAR * *11/1/ /31/2012 Past Performance is not indicative of future results. All investments involve risk, including loss of principal. Results are presented net of 0.65% annualized management fee. Please reference the Appendix for additional disclosure information. 18

19 C LIENT B ENEFITS NorthCoast Growth Complete Transparency (Separately Managed Account) KEY FACTOR TRANSPARENCY Traditional Long/Short Equity Opaque X (Limited Partnership) Daily LIQUIDITY Monthly / Quarterly X Oversight and Customization CUSTOMIZATION No Influence and Potential Gating X 0.65% of AUM FEES 2.0% of AUM 20% of Performance Fee X Lower portfolio costs without shorting and lower turnover in general within the portfolio creating more after tax gains SUMMARY High turnover & high portfolio costs, lower gains net-net This information has been prepared on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. 19

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21 D YNAMIC M ARKET E XPOSURE Asset Allocation Equity Investment Cash Position 15% 0% Dimension Analysis Technicals Sentiment Macro Valuation /29/ % -30% (0.19) -45% -60% (0.55) (0.49) (0.2) (0.5) (0.8) (1.1) Quantitative Data Points 5/28/2008 6/29/2008 Valuation Relative Valuation vs Bonds Valuation vs Inflation Consumers Producers Job Fed LEI Surprise Credit Producers Consumers Fear Reversal Momentum The chart above shows a hypothetical simulation of NorthCoast s proprietary market outlook analysis tool. This simulation is generated by using multiple data points across four broad dimensions including Technical, Sentiment, Macroeconomic, and Valuation indicators. The daily result determines equity exposure. It does not represent actual equity exposure. 21

22 D YNAMIC M ARKET E XPOSURE Asset Allocation Equity Investment Cash Position 45% 30% Dimension Analysis Technicals Sentiment Macro Valuation /29/ % 0% -15% 0.01 (0.00) (0.1) (0.4) (0.7) (1.0) (1.3) Quantitative Data Points 5/28/2009 6/29/2009 Valuation Relative Valuation vs Bonds Valuation vs Inflation Consumers Producers Job Fed LEI Surprise Credit Producers Consumers Fear Reversal Momentum The chart above shows a hypothetical simulation of NorthCoast s proprietary market outlook analysis tool. This simulation is generated by using multiple data points across four broad dimensions including Technical, Sentiment, Macroeconomic, and Valuation indicators. The daily result determines equity exposure. It does not represent actual equity exposure. 22

23 D YNAMIC M ARKET E XPOSURE 6/29/2017 Asset Allocation Equity Investment Cash Position 45% 30% 15% 0% -15% -30% -45% Dimension Analysis Technicals Sentiment Macro Valuation (0.36) (0.3) (0.6) (0.9) Quantitative Data Points 5/28/2017 6/29/2017 Valuation Relative Valuation vs Bonds Valuation vs Inflation Consumers Producers Job Fed LEI Surprise Credit Producers Consumers Fear Reversal Momentum The chart above shows a hypothetical simulation of NorthCoast s proprietary market outlook analysis tool. This simulation is generated by using multiple data points across four broad dimensions including Technical, Sentiment, Macroeconomic, and Valuation indicators. The daily result determines equity exposure. It does not represent actual equity exposure. 23

24 E NHANCEMENTS TO S TRATEGY F OUNDATION Creating an institutional product driven from a retail-centric, time-tested investment program utilizing quantitative, rules-based research. What is C-A-N-S-L-I-M? A stock management process derived from researching the top-performing stocks in history and identifying 7 (C-A-N-S-L-I-M) characteristics that each stock shared prior to significant price gains. Introduced and created by distinguished investor, William O Neil; Founder of the Investor s Business Daily newspaper & Author of the best-selling book: How to Make Money in Stocks. Built fromits retail origins, NorthCoast has evolved into a highly institutional investment firm. Factors Founding Guidelines Institutional Enhancements C Current Earnings Growth Current earnings up 20% or more Sustainable, reasonable, and industry-adjusted A Annual Earnings Growth Annual earnings increasing 20% or more Sustainable, reasonable, and industry-adjusted N S New Product or Service Supply/Demand of Shares Product, service, or management change provides a catalyst Shares outstanding should be large and trading volume should be big as the stock price increases Analyst estimates of forward earnings impact and relative strength Short interest indicators and share buybacks L Leading Industry Buy the leading stock in a leading industry Historical price, profitability and management trends I M Institutional Sponsorship Market Direction Institutional ownership by mutual funds in recent quarters should be increasing The market should be in a confirmed up trend since three out of four stocks follow the market s overall trend Sell side analyst recommendationsand estimates Market Technicals complemented with Valuation, Sentiment, and Macroeconomic indicators 24

25 D ISCLOSURE I NFORMATION The information contained herein has been prepared by NorthCoast Asset Management LLC ("NorthCoast") on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. NorthCoast has not sought to independently verify information obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or reliability of such information. All opinions and views constitute judgments as of the date of writing without regard to the date on which the reader may receive or access the information, and are subject to change at any time without notice and with no obligation to update. This material is for informational and illustrative purposes only and is intended solely for the information of those to whom it is distributed by NorthCoast. No part of this material may be reproduced or retransmitted in any manner without the prior written permission of NorthCoast. NorthCoast does not represent, warrant or guarantee that this information is suitable for any investment purpose and it should not be used as a basis for investment decisions. PAST PERFORMANCE DOES NOT GUARANTEE OR INDICATE FUTURE RESULTS. This material should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or investment products or to adopt any investment strategy. The reader should not assume that any investments in companies, securities, sectors, strategies and/or markets identified or described herein were or will be profitable and no representation is made that any investor will or is likely to achieve results comparable to those shown or will make any profit or will be able to avoid incurring substantial losses. Performance differences for certain investors may occur due to various factors, including timing of investment. Investment return will fluctuate and may be volatile, especially over short time horizons. INVESTING ENTAILS RISKS, INCLUDING POSSIBLE LOSS OF SOME OR ALL OF THE INVESTOR'S PRINCIPAL. The investment views and market opinions/analyses expressed herein may not reflect those of NorthCoast as a whole and different views may be expressed based on different investment styles, objectives, views or philosophies. To the extent that these materials contain statements about the future, such statements are forward looking and subject to a number of risks and uncertainties. 25

26 D ISCLOSURE I NFORMATION The firm is defined as NorthCoast Asset Management LLC. NorthCoast was established in 1988 and is an independent Registered Investment Advisor (RIA) registered with the Securities and Exchange Commission (SEC). The firm is a full service investment management company. The firm specializes in quantitative investment programs. NCAM is located in Greenwich, CT, and is not affiliated with any parent organization and has no other officesoperating under the same brand name. Returns are presented net-of-fees. Net-of-fee returns are reduced by trading costs and 0.65% annualized management fee taken monthly. Valuations are computed and performance is reported in U.S. dollars. A complete list of composite descriptions is available upon request. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. To obtain a compliant presentation for the associated strategy, please contact one of our advisors at The CAN SLIM investment program is a tactical, long-term growth strategy focused on capital appreciation with a secondary objective of downside protection. The strategy invests in leading growth stocks during favorable equity environments and scales to cash to preserve gains when bear market risk is high. The strategy adheres to a flexible investment mandate that allows for allocation shifts that range between 0%- 100% exposure to equities. Positions are managed (purchased and liquidated) through a combination of CAN SLIM guidelines and a proprietarystock scoring system designed to build a comprehensive growth portfolio. NorthCoast Growth is a tactical, long-term growth strategy focused on capital appreciation with a secondary objective of downside protection. The strategy invests in leading growth stocks during favorable equity environments and scales to cash to preserve gains when bear market risk is high. The strategy adheres to a flexible investment mandate that allows for allocation shifts that range between 0%-100% exposure to equities. Positions are managed (purchased and liquidated) through a proprietary stock scoring system designed to build a comprehensive growth portfolio. 26

27 B ENCHMARKS S&P 500: An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe. ( Tactical Competitors Average: Stadion. The equal average of three comparable investment programs/mutual funds: Good Harbor, F-squared, and HFRI Equity Hedge: The HFRI Monthly Indices ("HFRI") are a series of benchmarks designed to reflect hedge fund industry performance by constructing equally weighted composites of constituent funds. Equity Hedge Investment Managers maintain positions both long and short in primarily equity and equity derivative securities. S&P Put Option: This Annual-Options methodology replicates the returns observed by an investor buying exposure in the S&P500 Index, and simultaneously buying an at-the-money one-year European Put option on the S&P500. This investor would pay the option premium upfront, invest the remainder of the capital in the S&P500, and receive dividends, price appreciation and the value of the option, if any, at expiration. 70/30 S&P 500 / Cash: 70% multiplied by S&P 500 index return plus a 30% allocation to cash. 27