BROCHURE Published July 2013 The first step to increasing your money is keeping it. Tactical Core US
Tactical Core US Brochure 3 The first step to increasing your money is keeping it. Most investors want to get their investments back on track. How will they accomplish this? Their decisions will affect many aspects of their financial goals. Investors are asking What did we learn from the recent crisis and what can we do differently going forward? We advocate looking at important investment decisions with one eye on universal portfolio construction tenets (objectives, time and diversification) and one on investor s emotional perspectives (risk tolerance). The economic environment, the negative headlines and the level of uncertainty make reassessment a necessity. We believe that with a thorough review of the facts and an understanding of the investment options available, portfolios can be positioned for growth and stability in the future. A flexible option within your long-term strategic asset allocation is worth your consideration when deciding which course to take.
Tactical Core US Brochure 4 WHICH DIRECTION WILL THE MARKETS TAKE? No one can say for sure, but history suggests that extended bear markets often follow secular bull markets. History also tells us that during protracted bear markets, opportunities exist to capture gains. Between 1968 and 1982 (an essentially flat market), the S&P 500 posted double-digit returns in six calendar years. Similarly, during the past decade, the S&P 500 posted double-digit returns in five calendar years. Passive investors have spent 26 of the past 44 years treading water. S&P 500 Performance 1 VALUE IN AVOIDING MARKET DECLINES Investing in the market is a necessary condition for realizing an overall gain in stocks. For the period January 1981 to December 2012, only 10 days accounted for almost half of the gain during this period. Following a buy-and-hold strategy, while allowing you to capture the ten best days, will also cause you to experience the ten worst days. Understanding that returns are asymmetric (investors who lose 50% subsequently need returns of 100% to break even), avoiding market declines in the first place can be just as valuable. Missing the ten worst days improves the annualized return by almost 40% versus being fully invested in the S&P 500. $150 $140 Nov 1968 - Jun 1982 Value of Missing Losses 1 $130 $120 $110 $30,000 $25,000 Jan 1981 - Jun 2013 Miss 10 Worst Days $100 $20,000 $90 $80 $15,000 $70 $60 Nov-68 Nov-70 Nov-72 Nov-74 Nov-76 Nov-78 Nov-80 $1,600 Aug 2000 - Dec 2012 $1,500 $1,400 $10,000 $5,000 $- Jan-81 Jan-85 Jan-89 Jan-93 Jan-97 Jan-01 Jan-05 Jan-09 S&P 500 Miss 10 Best Days $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 Aug-00 Aug-02 Aug-04 Aug-06 Aug-08 Aug-10 Aug-12 Investing in the stock market is important for long-term success... but so is capital preservation during times of market stress. - Neil Peplinski, Good Harbor Financial 1) S&P 500 Index adjusted for dividends and splits. Assumes no reinvestment dividends and does not consider taxes. The S&P 500 Index is an unmanaged index of stocks considered a broad representation of the US stock market. You cannot invest directly in an index. Source: Bloomberg, Internal. There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses. Past performance is not indicative of future results.
Tactical Core US Brochure 5 GOOD HARBOR S TACTICAL SOLUTION The underlying premise of TACTICAL CORE US ( TCUS ) is that equity prices are driven by changes in investor equity risk premiums and that these premiums vary with time and the business cycle. Good Harbor Financial believes that during periods of market stress and exuberance, stock price variation is due almost exclusively to changing risk premiums rather than changing expected cash flows. Good Harbor makes adjustments to the portfolio based on continuous evaluation and interpretation of proprietary proxies for the Equity Risk Premium, which are based on such measures as yield curve dynamics, economic data and momentum measures. Once the portfolio s overall equity and fixed income allocation is determined, Good Harbor further allocates to the equity capitalization and fixed income duration segments that are expected to outperform over a 20-40 day horizon. The firm then applies a leverage overlay to the portfolio with the goal of further enhancing returns. Leverage targets are chosen such that overall portfolio volatility remains similar to that of the S&P 500. The concept of actively investing on the basis of changing risk premiums is broadly-based and applied. Portfolio assets are invested in vehicles designed to track, at some frequency or proportion, the returns of such indexes as the S&P 500, S&P 400, Russell 2000, Barclays Capital US 1-3 Year Treasury Bond, Barclays Capital US 3-7 Year Treasury Bond, and Barclays Capital US 7-10 Year Treasury Bond. TCUS does not take short positions in any exchange traded funds, does not make investments in inverse exchange traded funds and is not restricted to a minimum percentage in either stocks or bonds. Average Returns By Market Conditions 2 15% 10% TCUS S&P 500 11.99% 12.60% WE FOCUS ON REAL VS. RELATIVE RETURNS Achieving real returns, regardless of the market conditions, has always been our investment goal. TCUS attempts to capture most of the market s good times and miss most of the bad times by aligning capital with stronger opportunities and away from investments that show a higher probability of underperformance. TCUS has historically aligned with the stock market during sustained market rallies and moved defensively during sustained market declines. The TCUS composite has an attractive upside/downside capture ratio. Tactical Core US Portfolio Allocation Shown Against The S&P 500 Performance 3 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% $2,300 $2,100 $1,900 $1,700 $1,500 $1,300 $1,100 $900 $700 0% $500 May-03 May-04 May-05 May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13 Stocks Bonds S&P 500 Tactical Core US is a Long-Only Flexible Strategy Focusing on Real Returns. 5% 0% -0.55% 1.61% 2.85% -5% -10% -15% -10.27% Worst S&P 500 Quintile Middle S&P 500 Quintiles Best S&P 500 Quintile 2) For the reporting period April 30, 2003 to June 30, 2013 versus the S&P 500 Total Return Index. 3) Tactical Core US allocation and S&P 500 Total Return performance from April 30, 2003 to June 30, 2013. There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses. Past performance is not indicative of future results.
Tactical Core US Brochure 6 Stay the course with your investment goals. An investment in Tactical Core US can be a valuable component of virtually any long-term investment portfolio. The strategy seeks real returns regardless of the market conditions by allocating across various asset classes and is not restricted to a minimum percentage in either stocks or bonds. TACTICAL. We believe that even the most challenging environments present opportunities to succeed. DISCIPLINED. We believe that removing emotion from the decision making process generates enhanced risk-adjusted returns. FOCUSED. We believe the data. Our research establishes model-driven strategies with persistent economic underpinnings. Experienced leadership. Exceptional results. NEIL PEPLINSKI is the Chairman, Chief Investment Officer and Co-founder of Good Harbor Financial, as well as the chief architect of the Tactical Core series, the firm s flagship statistical asset allocation strategy. With 19 years of professional experience, Neil is responsible for research, investment analysis and the development/oversight of new investment strategies and models. He previously served as a portfolio manager and quantitative analyst overseeing a $400 million portfolio of structured assets. Neil earned an MBA with High Honors from The University of Chicago Booth School of Business, an MSEE from The University of Michigan and a BSEE from The Michigan Technological University where he graduated summa cum laude. PAUL INGERSOLL is the Chief Executive Officer and Co-founder of the firm. With 25 years of professional experience, Paul is responsible for the strategic and operational leadership of Good Harbor. Previously, he served as a senior finance officer in the portfolio companies of several private equity firms and was a co-founder of a business services company, which grew from a start-up to over $700 million in revenue with a successful IPO in 1998. Paul received his MBA with Honors from The University of Chicago Booth School of Business and a BA from The University of Michigan.
The strategy invests in mutual funds and exchange traded funds (ETFs) which are offered by prospectus only. Investors should consider funds investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other important information, is available from your Financial Advisor and should be read carefully before investing. The investment return and principal value of an investment will fluctuate, so that an investor s shares, when redeemed, may be worth more or less than their original cost. ETFs trade like stocks and may trade for less than their net asset value. There will be brokerage commissions associated with buying and selling ETFs unless trading occurs in a fee-based account. Performance results for the composite presented are from April 30, 2003 to the date of this report. Performance results are presented in US dollars and are net-of-max-fees and trading expenses and reflect the reinvestment of dividends and capital gains. The applicable fee schedule is 2%. Actual fees may vary based on, among other factors, account size and custodial relationship. Prior to May 2010, the composite contained only non-wrap fee accounts and results reflect gross performance of the TACTICAL CORE US composite reduced by the maximum fee. Thereafter the composite results consist 100% of wrap-fee accounts. No current or prospective client should assume future performance of any specific investment strategy will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may cause the performance results of your portfolio to differ materially from the reported composite performance. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client s investment portfolio. Historical performance results for market indices generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. Portfolios in the composite utilize levered index products. Leveraged ETFs are considered risky. The use of leverage strategies by a fund increases the risk to the fund and magnifies gains or losses on the investment. You could incur significant losses even if the long-term performance of the underlying index showed a gain. Most leveraged ETFs reset daily. Due to the effect of compounding, their performance over longer periods of time can differ significantly from the performance of their underlying index or benchmark during the same period of time. The S&P 500 Total Return Index is the total return version of the S&P 500 Index which includes the effects of reinvested dividends. The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The investment strategy and types of securities held by the comparison indices may be substantially different from the investment strategy and the types of securities held by the TACTICAL CORE US strategy. Good Harbor Financial, LLC is registered as an investment adviser with the United States Securities and Exchange Commission (the SEC ). Registration does not constitute an endorsement of the firm by the SEC nor does it indicate that the adviser has attained a particular level of skill or ability. Good Harbor Financial, LLC claims compliance with the Global Investment Performance Standards (GIPS ). To receive a complete list and description of the firm s composites and/or a presentation that adheres to the GIPS standards, please contact the firm at the address listed. Good Harbor Financial, LLC 155 North Wacker Drive Suite 1850 Chicago, Illinois 60606 Main: 312.224.8150 Sales: 877.683.1282 Advisor Support: 877.683.1283 info@goodharborfinancial.com www.goodharborfinancial.com