Adaptive Balance® Portfolios


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Investment Objective

We strive to provide high total return from a combination of investments in both the equity and income markets with an emphasis on the income markets.

How We Do It

Our proprietary indicators are used to determine a stock market exposure that adapts to both strength and weakness in the market, directing exposure to the HCM Shock Absorber Growth strategy from 0% to a maximum of 50% of account value. The balance, 50% to 100% of account value, is invested in the Flexible Income Strategy. The HCM Safety Net indicator is designed to warn of sudden potential declines in which case stock market exposure is quickly reduced.

Client Protection and Investment Discretion

All accounts are held at a Qualified Custodian, providing SIPC protection for all accounts. Hepburn Capital does not hold client moneys. Accounts are managed on a discretionary basis with notification of account activity provided in monthly statements prepared by an independent custodian.

Suitability

If you want to pursue growth but with more consistent returns and a lower surprise factor than is available through normal stock market investments, the Adaptive Balance® strategy may be for you.

Minimums

The Adaptive Balance® strategy as described is designed for accounts over $250,000 and above, although the same decision making process may be used in smaller accounts using different investments. The minimum fee is $195 per month.

  


Additional Details


 

PERFORMANCE OBJECTIVE

The performance objective of the Adaptive Balance® Strategy is to provide an acceptable level of total return (after deduction of HCM’s maximum fees and all trading costs) from a blend of equity and income investments.  There can be no assurance that the objectives of this strategy will be met.

INCEPTION DATE

This strategy was previously called the Balanced model that began operating on  March 15, 2001.  Balanced was a strict 50/50 blend of HCM’s Flexible Income model and its Careful Growth model rather than the flexible blend this strategy enjoys.

 

CONCEPT

Stock Exposure Indicator Adaptive 01-14Adaptive Balance® gets its name from a shifting blend of stock and bond investments, driven by Hepburn Capital’s Stock Market Exposure Indicator, shown here, which Adapts to Changing Markets® by adjusting stock exposure to the ups and downs of the markets and limiting maximum exposure to stocks to 50% of account value.

The balance of the account, not invested in stocks, will be invested in HCM’s Flexible Income model which is a blend of bond and currency funds.

Holdings may come from any segment of these markets and may be concentrated in just one market segment.   Primary investment vehicles are ETFs, mutual funds and stocks.

At times this portfolio may use inverse investments designed to go up as a segment of the market goes down, or at times of great market uncertainty, retreat entirely to the relative safety of a money market fund.   This ability to get client money “out of harm’s way” occasionally on short notice, is what makes HCM different from ordinary advisers.

THE EDGE PROVIDED TO INVESTORS

The Adaptive Balance® Strategy adapts to changing markets® by using an evolving diversification plan designed to avoid being caught in a prolonged market decline while offering the potential for gains in up markets.

At Hepburn Capital we believe that investment success comes from having more money in investments that are going up and less in investments that are going down and our Adaptive Balance® Strategy is one way of systematically implementing that philosophy.  HCM’s systems of Adapting to Changing Markets® by overweighting the better performing investments and retreating to cash or hedging during market declines is designed to provide account growth with only modest exposure to risk.

TAX CONSIDERATIONS

Gains from this strategy, if any, are expected to be taxable as ordinary income or short term capital gains.  This strategy may be implemented in taxable accounts, but it is especially well suited to an IRA or other retirement plan accounts.

OTHER CONSIDERATIONS

Implementation of the Adaptive Balance® strategy may involve the use of mutual funds including exchange traded funds.  Mutual funds are not insured by the FDIC or any other agency, are not guaranteed by any financial institution, are not obligations of any financial institution, and involve investment risk, including possible loss of principal.  Investment returns and principal will fluctuate so that your shares, when redeemed, may be worth more or less than their purchase price.  Please read our disclosure Brochure, SEC form ADV, Part 2A, before investing.  The Brochure is available on our website, www.HepburnCapital.com.

Adaptive Balance® portfolios may invest in both long and short positions, and thus may lose or make money regardless of market direction.  Leverage may be used which can increase potential profits and losses.

Despite our efforts to capture and quantify the key financial and economic relationships relating to this objective, our knowledge about many of the important linkages is far from complete and in all likelihood will remain so.  Every investment model, no matter how detailed or how well designed, conceptually and empirically, is a vastly simplified representation of the securities markets with all its intricacies and variables.  Consequently, even with large advances in computational capabilities and greater comprehension of economic linkages, our knowledge base is barely able to keep pace with the ever-increasing complexity of our global markets. No claim is made that the strategy will perform in the future as it has in the past or as described above. Also, there can be no assurances that the strategy will produce a profit in the future; it is possible that the strategy will produce losses.

Adaptive Balance® is an investment advisory service offered by Hepburn Capital Management, LLC, a Registered Investment Advisor.  Adapting to Changing Markets® and Adaptive Balance® are registered service marks of Will Hepburn.

Hepburn Capital Management, LLC is located at 2069 Willow Creek Road, Prescott, AZ  86301