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Salient Tactical Growth Portfolio

Overview

Sub-Advisor

The Salient Tactical Growth strategy is sub-advised by Broadmark Asset Management.

Philosophy

The strategy capitalizes upon a persistent, recurring market inefficiency. This exploitable inefficiency is created by the relative return investment methodology employed to manage the majority of U.S. institutional equity funds. The core beliefs of the strategy are:

  • Portfolio risk and return can be enhanced with a strategy that is not required to be long only and fully invested
  • Stock market risk can be addressed and a multi-factor model has successfully identified these opportunities over time

Broadmark seeks to outperform traditional strategies by:

  • Increasing equity exposure when they think risks are low = Long ETFs
  • Creating inverse exposure when they think risks are high = Inverse ETFs
  • Taking a neutral position when they think no clear opportunities are apparent = Cash

Strategy

Broadmark utilizes ETFs which provide market and sector exposure while diversifying the portfolio and reducing stock selection risk. ETFs reduce portfolio volatility and offer the highest liquidity possible with very low trading costs. The use of ETFs provides an optimal blend of alpha with low volatility for strong risk-adjusted returns. Individual equities are not used in the Salient Tactical Growth Strategy since the additional alpha generated through superior stock selection is also accompanied by a commensurate increase in portfolio volatility and risk.

Process

Broadmark’s models provide key determinates in assessing optimal stock market exposure including:

  • Entry points
  • Amount of exposure
  • Type of exposure
  • Exit points
Team

Christopher J. Guptill

Co-Chief Executive Officer, Chief Investment Officer & Portfolio Manager, Broadmark Asset Management
San Francisco

Ricardo Cortez, CIMA

Co-Chief Executive Officer, Broadmark Asset Management
San Francisco

Performance

Quarterly Performance (%) as of 09/30/2017

  Q3 YTD 1 YR 3 YR 5 YR SINCE
INCEPTION
Composite GROSS 2.40 7.50 11.38 4.74 6.52 5.99
Composite NET 1.88 5.88 9.15 2.64 4.38 3.86
S&P 500 Index NET 4.48 14.25 18.61 10.81 14.22 14.55
Morningstar Long/Short Equity Index NET 1.93 4.88 5.60 1.04 2.89 3.09
Periods greater than one year are annualized.
Quarterly returns are preliminary.
Inception Date – 08/01/09
Gross returns are shown as supplemental information. Please see important disclosure below.
Net returns are calculated using a 2.00% wrap fee, applied monthly.

GIPS Performance & Disclosure

Year Pure Gross Return* Net Return† S&P 500 Total Return Morningstar Long/Short Equity Assets (millions) Number of Accounts % of Non Fee-Paying Accounts Annual Composite Dispersion‡ Annualized 3-Year Standard Deviation Composite Annualized 3-Year Standard Deviation Benchmark
20165.06%2.95%11.98%-0.68%$140.602880%0.41%6.70%10.59%
2015-0.06%-2.08%1.41%-1.89%$104.062840%0.13%6.45%10.48%
20144.16%2.06%13.69%1.89%$177.954840%0.22%5.66%8.98%
201318.34%15.99%32.39%11.16%$164.135170%0.33%5.71%11.94%
20126.72%4.57%16.00%2.75%$166.606650%0.34%6.65%15.09%
2011-2.61%-4.59%2.11%-3.44%$160.907100%0.18%NANA
20104.35%2.28%15.06%5.15%$135.706390%0.38%NANA
20096.55%5.68%13.96%6.05%$27.101480%NMNANA

The Tactical Growth Composite seeks to produce above-average, risk-adjusted returns in any market environment, while exhibiting less downside volatility than the market itself. The strategy is designed to evaluate potential long and short investments in an attempt to isolate those securities believed to be undervalued or overvalued relative to their intrinsic value and offer the greatest risk-adjusted potential for returns. The portfolio primarily invests in ETFs of securities and security indexes which can represent long, short, levered long or levered short positions in general asset classes of both U.S. and overseas equity markets. For comparison purposes, the composite’s primary benchmark is the S&P 500 Index. The S&P 500 Index consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value-weighted index and one of the most widely used benchmarks of U.S. stock performance. The composite’s secondary benchmark is the Morningstar Long/Short Equity Index, which is an equal-weighted index that measures the average performance of all funds in Morningstar’s long/short equity category. The portfolio is sub-advised by Broadmark Asset Management, LLC, an independent registered investment advisor. The Tactical Growth Composite was created on August 1, 2009.

Performance shown prior to June 2015 was achieved by the portfolio management team at Forward Management, LLC (“Forward”). Forward was acquired by Salient in June 2015. Salient is the trade name for Salient Partners, LP, which together with its subsidiaries provides asset management and advisory services. Salient claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Salient has been independently verified for the periods beginning January 1, 2011, to March 31, 2016. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis, and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. Salient includes all assets of Salient Advisors, LP, Endowment Advisors, LP, and the non-trust and advisory assets of Salient Capital Advisors, LLC, which are all being managed by Salient’s Asset Management Group. The firm maintains a list of composite descriptions, which is available upon request.

Results are based on fully discretionary accounts under management in this style. Taxable and non-taxable accounts are included. The investment management fee schedule for the composite is 1% on the first $250,000, 0.75% on the next $250,000, 0.65% on the next $500,000 and 0.50% in excess over $1,000,000. Actual investment advisory fees incurred by clients may vary. Past performance is not indicative of future results.

The U.S. dollar is the currency used to express performance. Wrap/bundled fee accounts have represented the entire composite since inception. Wrap/bundled fee accounts pay a fee based on a percentage of assets under management. Other than brokerage commissions this fee includes investment management, portfolio monitoring, consulting services and, in some cases, custodial services. Gross returns are shown as supplemental information and are stated gross of all fees and transaction costs. Returns include the reinvestment of all income. Other than levered and inverse ETFs, leverage or derivatives are not used. The use of levered and inverse ETFs is anticipated to be infrequent and may not materially impact returns. The risks associated with ETFs are detailed in the individual ETF’s prospectus which will be provided upon request. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.

Related Resources

Separately Managed Accounts and related investment advisory services are provided by Forward Management, LLC, a federally regulated Investment Advisor.