Nottingham’s investment philosophy is designed to deliver superior risk-adjusted returns over a business cycle when compared to a strategy’s respective benchmark. Our philosophy has been consistently implemented through a core-satellite, or strategic-tactical approach to portfolio construction. The core of an investment portfolio typically represents 75% of a portfolio’s value and takes a long-term investment stance. The remaining 25% of the portfolio is tactical, or short-term in nature, designed to alter the risk-return profile in the near term. Tactical trades can be thought of as alpha generators, risk reducers, or both.
Core Portfolio Implementation
The core of a portfolio is implemented using a three-pronged approach made up of capitalization-weighted (market-cap-weighted), single factor (Minimum Volatility), and multi-factor (Quality, Momentum, Value) exposures. These exposures are fine-tuned by Nottingham’s Investment Policy Committee (IPC), aims to reduce overall portfolio volatility, while still delivering an attractive return when compared to the overall market. Historically, the combination of these factors within the portfolio’s core has led to better portfolio Sharpe Ratios (risk-adjusted returns) when compared to the benchmark.
Minimum Volatility in Practice
Currently, Nottingham employs Minimum Volatility strategies on a global basis, with exposure to U.S. Large- and Small-Caps, as well as Developed International (EAFE) and Emerging Markets (EM). As part of our implementation process described above, our Global Equity, All-Asset, and Balanced strategies have had exposure to Minimum Volatility strategies on a global basis through the core of each respective equity allocation. Tactically speaking, Nottingham’s IPC increased exposure to the Minimum Volatility exposure multiple times during the market’s heyday earlier this summer. Specifically, we added U.S. Small-Cap Minimum Volatility exposure (with proceeds from reducing market cap-weighted exposure) in June and August, just as the S&P Small-Cap 600 index was making all-time highs. Furthermore, the IPC again increased exposure to U.S. Large-Cap and Emerging Markets Minimum Volatility strategies. These tactical adjustments “dialed up” the Minimum Volatility factor with the short-term view that equity market volatility would increase, a decision that proved timely.
Matthew Krajna, CFA
Co-Chief Investment Officer
Matthew joined Nottingham in 2012 and is a member of the Investment Policy Committee. He brings over 13 years of investment experience to the team. Matthew is responsible for conducting investment research, due diligence, and contributing to Nottingham Advisors overall investment strategy. Additionally, He is responsible for establishing the firm’s strategic and tactical asset allocations. Matthew works with investment advisors and both individual clients & institutions to help build customized investment solutions to fit their needs.
Nottingham Advisors offers both institutional and individual clients experience, sophistication, and professionalism when helping them achieve their goals. With over 40 years of serving Western New York and clients in more than 30 states, Nottingham tailors each solution to fit the specific needs of each client.
For more information about Nottingham’s offerings, visit www.nottinghamadvisors.com or call 716-633-3800.
Nottingham Advisors, LLC (“Nottingham”) is an SEC registered investment adviser located in Amherst, New York. Registration does not imply a certain level of skill or training. Nottingham and its representatives are in compliance with the current registration and notice filing requirements imposed upon SEC registered investment advisers by those states in which Nottingham maintains clients. Nottingham may only transact business in those states in which it is registered, notice filed, or qualifies for an exemption or exclusion from registration or notice filing requirements. For information pertaining to the registration status of Nottingham, please contact Nottingham or refer to the Investment Advisor Public Disclosure Website (www.adviserinfo.sec.gov). Any subsequent, direct communication by Nottingham with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.
This newsletter is limited to the dissemination of general information pertaining to Nottingham’s investment advisory services. As such nothing herein should be construed as the provision of personalized investment advice. The information contained herein is based upon certain assumptions, theories and principles that do not completely or accurately reflect your specific circumstances. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. Adhering to the assumptions, theories and principles serving the basis for the information contained herein should not be interpreted to provide a guarantee of future performance or a guarantee of achieving overall financial objectives. As investment returns, inflation, taxes and other economic conditions vary, your actual results may vary significantly. Furthermore, this newsletter contains certain forward-looking statements that indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of their dates. As such, there is no guarantee that the views and opinions expressed in this article will come to pass. This newsletter should not be construed to limit or otherwise restrict Nottingham’s investment decisions.
This newsletter contains information derived from third party sources. Although we believe these third party sources to be reliable, we make no representations as to the accuracy or completeness of any information prepared by any unaffiliated third party incorporated herein, and take no responsibility therefore. Some portions of this newsletter include the use of charts or graphs. These are intended as visual aids only, and in no way should any client or prospective client interpret these visual aids as a method by which investment decisions should be made. We have provided performance results of certain market indices for illustrative purposes only as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio. It should not be assumed that your account performance or the volatility of any securities held in your account will correspond directly to any benchmark index. A description of each index is available from us upon request.
Investing in the stock market involves gains and losses and may not be suitable for all investors. Past performance is no guarantee of future results.
For additional information about Nottingham, including fees and services, send for our Disclosure Brochure, Part 2A or Wrap Brochure, Part 2A Appendix 1 of our Form ADV using the contact information herein.