"After more than 20 years in finance, from the LSE to Salomon Brothers to LTCM, you d have thought that I d have figured out how to invest my family s savings. Well, it was 2002, I just turned 40, and I hadn t." - Victor Haghani, Founder Elm Watch the full talk here
Combining the Best of Passive and Active Investing
Our Dynamic Asset Allocation Philosophy Return chasing is one of several behavioral biases that leads to short-term momentum and long-term mean reversion in asset prices. We use simple measures of value and momentum to efficiently adjust your portfolio, which we believe will result in better long-term risk-adjusted returns, and give you greater confidence in how your portfolio is managed. See our research on return chasing here, and our research on value and momentum applied at the asset class level in our paper in the Journal of Portfolio Management here.
Elm s simple algorithmic approach has improved portfolio returns over every decade for 90 years Annual outperformance of Elm s dynamic asset allocation strategy vs. a static weight portfolio. +4.09% p.a. outperformance +3.44% +3.58% +2.62% +2.83% +2.64% +2.54% +2.28% +2.22% 1926 to 1934 1935 to 1944 1945 to 1954 1955 to 1964 1965 to 1974 1975 to 1984 1985 to 1994 1995 to 2004 2005 to 2013 Source: Elm Research. See our research on value and momentum applied at the asset class level in our paper in the Journal of Portfolio Management here. 4
Elm s portfolios are dynamic 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Short Term Fixed Income Fixed Income High Yield Real Estate & Commodities Non-US Equities US Equities Note: The asset allocation shown represents Elm s dynamic asset allocation strategy as designed for a US taxable investor, who is invested via our Delaware LLC. Each of our strategies follows our rules-based asset allocation methodology, an approach we call Active Index Investing. Please click here for a note that describes in detail the three main components of this approach: the construction of the Baseline portfolio and the value and momentum overlays to that Baseline portfolio which make the portfolio responsive to changing market conditions. 5
Elm s Regional Weighting Scheme: more representative than simple market cap weights Our more inclusive and forward-looking approach combines a range of metrics which leads to a more diversified and representative portfolio. 100% 90% 80% 70% 60% 50% Emerging Markets Japan Dev Asia xjapan UK Europe xuk Canada 40% 30% 20% US 10% 0% MSCI FTSE Earnings Elm Unadjusted Market Cap GDP Population To read more about Elm s regional weighting scheme, check out our blog post. Sources: Bloomberg, IMF, Elm Partners research. 6
and helps avoid the tendency of market cap indexing to over-expose passive investors to bubbles such as the late 80s Japanese equity bubble Source: MSCI, Bloomberg. 7
Returns of Elm Partners Portfolio LLC Delaware Fund for US Qualified Purchasers (audited through 2016) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual Ltd Index 2012 3.06% 2.33% 0.58% -0.23% -5.02% 2.66% 0.91% 1.60% 1.90% -0.11% 1.01% 2.40% 11.38% 1.114 2013 3.18% -0.32% 1.50% 2.24% -1.15% -2.23% 3.64% -1.56% 3.66% 2.33% 0.22% 1.12% 13.12% 1.260 2014-2.26% 3.48% 0.19% 0.73% 1.40% 1.60% -1.34% 1.64% -3.34% 0.82% 0.07% -1.10% 1.71% 1.282 2015-0.17% 2.67% -0.79% 1.63% -0.23% -1.67% -0.58% -3.76% -1.40% 2.71% -0.66% -1.25% -3.62% 1.235 2016-2.37% -0.11% 4.25% 1.27% -0.27% 0.86% 2.67% 0.37% 0.87% -1.77% -0.26% 1.31% 6.84% 1.320 2017 2.24% 1.73% 1.09% 1.33% 1.42% 0.43% 2.62% 11.37% 1.470 Return Since Fund Inception per annum 7.14% StDev of Monthly Returns per annum 6.54% Past Performance is not indicative of future returns 8
Portfolio Value Elm --- Historical & Simulated Performance (Actual Fund Performance from January 2012 to present) 2.20 2.00 1.80 Annualized Returns Elm Market Cap Index Advisor Index Last 1 year 11.9% 11.1% 10.4% Last 5 years 7.1% 7.7% 6.3% Last 10 years 6.7% 4.2% 3.0% Elm (simulated pre-2012) 1.60 Market Cap Weighted 65/35 Index Portfolio (1) 1.40 1.20 Index of Investment Advisors (2) 1.00 0.80 0.60 Note: Performance is based on the simulated returns of a portfolio of $1m invested in Elm s dynamic asset allocation strategy designed for a US taxable investor from the end of 2006 through December 2011, and from then on, performance is based on actual returns of our Delaware Fund for US investors. Past performance is not indicative of future returns. 1. The Benchmark portfolio consists of 65% Global Equities (ishares ACWI from March 2008, and MSCI AC World Index Net TR before that), 20% US Fixed Income (Vanguard s VBTLX) and 15% US T-bills. 2. Peer Group Average is based on ARC Private Client Indices, which provides performance numbers delivered to private clients by participating investment managers. Index used is USD Steady Growth, which is comprised of portfolios with 60%-80% equity risk. 9
Number of Investors (orange) AUM (green) Growth 180 $600 mm 160 $500 mm 140 120 $400 mm 100 $300 mm 80 60 $200 mm 40 $100 mm 20 0 01/12 01/13 01/14 01/15 01/16 01/17 $0 mm Elm's Global Balanced funds for US and non-us investors and Separately Managed Accounts at Fidelity 10
Term Sheet Term sheet for Strategy Risk Target Elm --- Delaware LLC for US taxable investors Active Index Investing --- Global, balanced, dynamic Risk equivalent to traditional 65% global risk assets and 35% fixed income portfolio # of Asset Buckets 21 asset class buckets Minimum Investment $2,000,000 Management Fee Liquidity Leverage/Shorting Custodian Transparency Commissions Tax Aware Expected Turnover Investor Protection Elm AUM Also offered as 0.12% per annum Monthly None Vanguard / Morgan Stanley Full position reporting and monthly statements from the Fund s Administrator Zero commissions on trades at Vanguard Yes, tax sensitive with tax loss harvesting 100% per annum Independent Administrator $520mm ($255mm in LLC for US Investors) SMAs at Fidelity for US Investors ($300k min) or Cayman Fund for non-us ($1mm min) 11
Elm Get in touch If you have questions, request a call-back by completing the form at elmfunds.com/invest Victor Haghani Founder & CEO victor@elmfunds.com (307) 222-4725 Bruce Lafranchi Investor Relations bruce@elmfunds.com (646) 694-0301