Description
U.S. EQUITY RESEARCH
Sector Watch
January 4, 2016
Sam Stovall
U.S. Equity Strategist
THE BARBELL PORTFOLIO
History suggests owning last year's 10 best and 10 worst sub-Industries
Author of
The Seven Rules of Wall Street
S&P Capital IQ
Global Markets Intelligence
55 Water Street
New York, NY 10041
212-438-9549
sam.stovall@spcapitaliq.com
Many will write-off 2015 as a challenging, but unremarkable year for U.S. equities.
Despite succumbing to a 10%+ correction in price late in August, the S&P Composite 1500 (consisting of the large cap S&P 500, MidCap 400 and SmallCap 600 indexes) fell only 1.0% in price for the full year, led by mid- and small-cap declines of less than 4% that were outweighed by a large-cap dip of less than 1.0%. Six of the 1500’s 10 sectors also slipped in price, led by alternating cyclical and defensive sector leadership by the Consumer Discretionary, Health Care, Information Technology, and Consumer Staples sectors. The worst returns were recorded by the consistently lagging Energy, Industrials, Materials and Utilities groups.
On the sub-industry level, things were equally forgettable, as only 39% of the 149 groups gained in price, led by more than 50% jumps for Home Entertainment Software and Internet Retail. On the flip side, slides in excess of 50% were recorded by the Coal & Consumable Fuels, Diversified Metals & Mining, and Oil & Gas Storage & Transportation groups. Buy Last Year’s Winners or Losers? It is at this time of each year that investors debate whether it would be better to "let your winners ride" or "buy low and sell high” when establishing a portfolio of sectors or sub-industries for the year ahead. They would argue over whether they should embrace a momentum approach of buying last year’s three best performing S&P 500 sectors and holding them through the end of the year, or taking a contrarian approach by buying and holding last year's three worst-performing sectors.
Carrying this concept to the next level, investors wonder if they should buy last year's 10 best or 10 worst performing sub-industries. History says, but does not guarantee, that investors Tune in to “Stovall on Sectors” Every Friday on the S&P Capital IQ YouTube channel www.youtube.com/SPCapitalIQ Please follow me on Twitter: @StovallSPCapIQ S&P Capital IQ For more information 1-877-219-1247 This report is for information purposes and should not be considered a solicitation to buy or sell any security. Neither S&P Capital IQ nor any other party guarantees its accuracy or makes warranties regarding results from its usage.
Redistribution is prohibited without written permission. Copyright © 2016 Standard & Poor’s Financial Services LLC, a part of McGraw Hill Financial, Inc. Redistribution, reproduction and/or photocopying in whole or in part is prohibited without written permission.
All rights reserved. STANDARD & POOR’S, S&P, S&P 500, S&P EUROPE 350 and STARS are registered trademarks of Standard & Poor’s Financial Services LLC. S&P CAPITAL IQ is a trademark of Standard & Poor’s Financial Services LLC. Please see required disclosures on last 2 pages. 1 .
The Barbell Portfolio 2016 10 Best 2015 Portfolio 10 Worst 2015 Portfolio S&P 500 Sub-Industries % Chg. Proxy S&P 500 Sub-Industries % Chg. Proxy Brewers 26.0 TAP $94 *** Aluminum (37.5) AA $10 **** Building Products 24.0 MAS $28 ***** Casinos & Gaming (53.5) WYNN $69 *** Construction Materials 35.0 VMC $95 **** Coal & Consumable Fuels (76.6) CNX $8 ***** Distillers & Vintners 31.9 STZ $142 ***** Department Stores (36.6) M $35 *** Footwear 30.0 NKE $62 **** Diversified Metals & Mining (70.8) FCX $7 **** Home Entertainment Software 64.7 EA $69 **** Homefurnishing Retail (36.7) BBBY $48 *** Internet Retail 83.4 EXPE $124 **** Hotel & Resort REITs (35.5) HST $15 *** Internet Software & Services 33.3 FB $105 **** Independent Power Producers (43.1) NRG $12 **** Oil & Gas Refining & Marketing 24.6 VLO $71 ***** Oil & Gas Exploration & Production (35.5) SWN $7 ***** Restaurants 22.1 SBUX $60 **** Oil & Gas Storage & Transportation (52.0) KMI $15 **** Source: S&P Capital IQ. Past performance is no guarantee of future results. would have done better buying and holding last year's three best-performing S&P 500 sectors, while avoiding the three worst. On the sub-industry level, however, history shows that they would have seen increased returns when owning both the 10 best and the 10 worst groups. From 1991 through 2015, the S&P 500 recorded a compound annual growth rate (CAGR) of 7.6%, excluding dividends reinvested. An equal weighting of the three best performing S&P 500 sectors from the prior calendar year, however, recorded a CAGR of 8.4%, and posted a 68% frequency of outperformance, or batting average of beating the market.
Yet the three worst prioryear performers saw below-market CAGR of 6.8% in the subsequent year, and beat the S&P 500 only 40% of the time. Therefore, history says that on a sector level, investors are advised to let their winners ride, rather than trying to buy low, with the intent of selling high later on. On a sub-industry level, however, things proved to be a bit different. The 10 best performing subindustries from the prior year, held in equal proportions, returned a CAGR of 12.1% since 1991, while the 10 worst performing sub-industries recorded a slightly better CAGR of 12.8%.
However, combining the 10 best S&P 500 sub-industries from the prior year with the 10 worst into a portfolio of 20 equally-weighted groups recorded a CAGR of 13.5% over this 25-year period. Finally, all three groupings (10 best, 10 worst and the 20-group Barbell Portfolio), outpaced the S&P 500 in two out of every three years since 1991. In 2015, the Barbell Portfolio underperformed the S&P 500, falling 6.9% to the S&P 500’s decline of 0.7%. The 10 best sub-industries gained 2.0% last year, but the portfolio’s average was dragged down by the 10 worst’s 18.3% decline. Sometimes the underperformance goes the other way, however.
In 2011, when the S&P 500 was also down slightly, the Barbell Portfolio posted a 4.9% drop, due to the 10 best’s 8.9% decline that was moderated by the 10 worst’s 1.1% gain. The accompanying table contains the 10 best and 10 worst sub-industries from 2015, their price performances in 2015 and the S&P 500 stock that serves as a proxy for the sub-industry. Since there are very few ETFs that mimic the composition of S&P 500 sub-industries, I used S&P Capital IQ’s MarketScope Advisor platform to screen for the companies within each sub-industry to serve as a proxy based on S&P STARS, market cap, and target price differential. S&P Capital IQ For more information 1-877-219-1247 So there you have it. History has shown that sticking with the leaders, rather than opting for the laggards, has been a successful sector investing technique over the past 25 years.
Buying last year’s top three S&P 500 sectors and holding them in equal proportions for the coming year produced a CAGR of 8.4% versus 6.8% for the bottom three sectors and 7.6% for the market as a whole. Even better, buying and holding the prior year’s 10 best performing sub-industries offered a substantially higher CAGR, as did last year’s 10 worst performers groups. Combining the 10 best with the 10 worst, however, delivered the best of both worlds: a CAGR of 13.5%.
As a result, one could say that the outcome of owning the good and the bad wasn’t so ugly after all. SECTOR WATCH 2 . Required Disclosures Glossary STARS Raking system and definition: ★★★★★ 5-STARS (Strong Buy): Total return is expected to outperform the total return of a relevant benchmark, by a wide margin over the coming 12 months, with shares rising in price on an absolute basis. ★★★★☆ 4-STARS (Buy): Total return is expected to outperform the total return of a relevant benchmark over the coming 12 months, with shares rising in price on an absolute basis. ★★★☆☆ 3-STARS (Hold): Total return is expected to closely approximate the total return of a relevant benchmark over the coming 12 months, with shares generally rising in price on an absolute basis. ★★☆☆☆ 2-STARS (Sell): Total return is expected to underperform the total return of a relevant benchmark over the coming 12 months, and the share price not anticipated to show a gain. ★☆☆☆☆ 1-STAR (Strong Sell): Total return is expected to underperform the total return of a relevant benchmark by a wide margin over the coming 12 months, with shares falling in price on an absolute basis. S&P Capital Ranking Definitions: Overweight rankings are assigned to approximately the top quartile of the asset class. Marketweight rankings are assigned to approximately the second and third quartiles of the asset class. Underweight rankings are assigned to approximately the bottom quartile of the asset class. S&P Capital IQ Quality Ranking Growth and stability of earnings and dividends are deemed key elements in establishing S&P Capital IQ's earnings and dividend rankings for common stocks, which are designed to capsulize the nature of this record in a single symbol. It should be noted, however, that the process also takes into consideration certain adjustments and modifications deemed desirable in establishing such rankings. The final score for each stock is measured against a scoring matrix determined by analysis of the scores of a large and representative sample of stocks. The range of scores in the array of this sample has been aligned with the following ladder of ranking. A+ Highest A High A- Above Average B+ Average B BC D Below Average Lower Lowest In Reorganization Required Disclosures Global Markets Intelligence (“GMI”) is a business unit of S&P Capital IQ. Standard & Poor’s Investment Advisory Services LLC (“SPIAS”) and McGraw-Hill Financial Research Europe Limited (“MHFRE”) (collectively, “GMI Investment Advisory Services” or “GMI IAS”), each a wholly owned subsidiary of McGraw Hill Financial, Inc., operate under the GMI brand.
GMI IAS provides non-discretionary advisory services to institutional clients and does not provide advice to underlying clients of the firms to which it provides advisory services. In the United States, advisory S&P Capital IQ services are offered by SPIAS, which is authorized and regulated by the U.S. Securities and Exchange Commission.
SPIAS does not act as a "fiduciary" or as an "investment manager", as defined under Employee Retirement Income Security Act (ERISA), to any investor. MHFRE, is authorized and regulated by the Financial Conduct Authority in the United Kingdom. Under the Markets in Financial Instruments Directive (‘MiFID’), MHFRE is entitled to exercise a passport right to provide cross border investment advice to European Economic Area (‘EEA’) States.
MHFRE has duly notified the Financial Conduct Authority in the United Kingdom of its intention to provide cross border investment advice in EEA States in accordance with MiFID. MHFRE trades as S&P Capital IQ, does not provide services to “retail clients” and only has “professional clients” as defined under MiFID. In the United Kingdom to the extent the material is a financial promotion it is issued and approved by MHFRE.
In Hong Kong, advisory services are offered by Standard & Poor's Investment Advisory Services (HK) Limited (“SPIAS HK”), which is regulated by the Hong Kong Securities and Futures Commission; in Singapore, by McGraw-Hill Financial Singapore Pte. Limited ("MHFSPL"), which is regulated by the Monetary Authority of Singapore; in Malaysia, by Standard & Poor's Malaysia Sdn Bhd (“S&P Malaysia”), which is regulated by the Securities Commission of Malaysia; and in Australia, by Standard & Poor's Information Services (Australia) Pty Ltd ("SPIS"), which is regulated by the Australian Securities & Investments Commission. In Korea, SPIAS holds a cross-border non-discretionary investment adviser license and it is registered with the Financial Supervisory Service (FSS).
SPIAS, MHFRE, SPIAS HK, MHFSPL, S&P Malaysia and SPIS, each a wholly owned subsidiary of McGraw Hill Financial, Inc. operate under the GMI brand. GMI IAS offers four broad categories of investment advice: (i) portfolio strategies; (ii) fund research and recommendations; (iii) asset allocation; and (iv) analyses of certain U.S. and European fixed income securities using its proprietary Risk-to-Price scoring methodology.
GMI IAS’ model portfolios (“model(s)”) are not collective investment funds. Assets managed in accordance with the models may lose money. GMI IAS is not responsible for client suitability and or the appropriateness of the service for the client. Any performance data quoted represents past performance.
Past performance is not indicative of future returns. With respect to the investment recommendations made by GMI IAS, investors should realize that such investment recommendations are provided only as a general guideline. There is no agreement or understanding whatsoever that GMI IAS will provide individualized advice to any investor. GMI IAS is not responsible for client suitability.
GMI IAS does not take into account any information about any investor or any investor’s assets when providing investment advice. GMI IAS does not have any discretionary authority or control with respect to purchasing or selling securities or making other investments. Individual investors should ultimately rely on their own judgment and/or the judgment of a financial advisor in making their investment decisions.
Investments are subject to investment risks including the possible loss of the principal amount invested. An investment based upon GMI IAS’ investment advice should only be made after consulting with a financial advisor and with an understanding of the risks associated with any investment in securities, including, but not limited to, market risk, currency risk, interest rate risk and foreign investment risk. SPIAS, MHFRE and its affiliates (collectively, S&P) and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user.
The Content is 3 . Required Disclosures provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages. Based on a universe of funds provided to SPIAS, SPIAS may include in a model portfolio or substitution list, if applicable, otherwise present as an investment option and/or recommend for investment certain funds to which S&P licenses certain intellectual property or otherwise has a financial interest, including exchange-traded funds whose investment objective is to substantially replicate the returns of a proprietary S&P Dow Jones Indices, such as the S&P 500. SPIAS includes these funds in models, otherwise presents them as an investment option and/or recommends them for investment based on asset allocation, sector representation, liquidity and other factors; however, SPIAS has a potential conflict of interest with respect to the inclusion of these funds.
In cases where S&P is paid fees that are tied to the amount of assets that are invested in the fund or the volume of trading activity in the fund, investment in the fund will generally result in S&P receiving compensation in addition to the subscription fees or other compensation for services rendered by SPIAS. Poor’s Ratings Services may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at: www.standardandpoors.com/usratingsfees. GMI IAS may consider research and other information from affiliates in making its investment recommendations.
The investment policies of certain model portfolios specifically state that among the information GMI IAS will consider in evaluating a security are the credit ratings assigned by Standard & Poor’s Ratings Services. GMI IAS does not consider the ratings assigned by other credit rating agencies. Credit rating criteria and scales may differ among credit rating agencies.
Ratings assigned by other credit rating agencies may reflect more or less favorable opinions of creditworthiness than ratings assigned by Standard & Poor’s Ratings Services. For more detailed descriptions of disclosures and disclaimers such as investment risk and country conditions, please see: http://www.spcapitaliq.com/disclaimers/spias-investment-advisory-services Copyright © 2016 by Standard & Poor’s Financial Services, LLC. Redistribution, reproduction and/or photocopying in whole or in part is prohibited without written permission. All rights reserved. STANDARD & POOR’S, S&P and S&P 500 are registered trademarks of Standard & Poor’s Financial Services LLC.
CAPITAL IQ is a registered trademark of Capital IQ, Inc. S&P CAPITAL IQ is a trademark of Standard & Poor’s Financial Services LLC. Standard & Poor’s Ratings Services does not contribute to or participate in the provision of investment advice and or model portfolios. Standard & S&P Capital IQ 4 .
Despite succumbing to a 10%+ correction in price late in August, the S&P Composite 1500 (consisting of the large cap S&P 500, MidCap 400 and SmallCap 600 indexes) fell only 1.0% in price for the full year, led by mid- and small-cap declines of less than 4% that were outweighed by a large-cap dip of less than 1.0%. Six of the 1500’s 10 sectors also slipped in price, led by alternating cyclical and defensive sector leadership by the Consumer Discretionary, Health Care, Information Technology, and Consumer Staples sectors. The worst returns were recorded by the consistently lagging Energy, Industrials, Materials and Utilities groups.
On the sub-industry level, things were equally forgettable, as only 39% of the 149 groups gained in price, led by more than 50% jumps for Home Entertainment Software and Internet Retail. On the flip side, slides in excess of 50% were recorded by the Coal & Consumable Fuels, Diversified Metals & Mining, and Oil & Gas Storage & Transportation groups. Buy Last Year’s Winners or Losers? It is at this time of each year that investors debate whether it would be better to "let your winners ride" or "buy low and sell high” when establishing a portfolio of sectors or sub-industries for the year ahead. They would argue over whether they should embrace a momentum approach of buying last year’s three best performing S&P 500 sectors and holding them through the end of the year, or taking a contrarian approach by buying and holding last year's three worst-performing sectors.
Carrying this concept to the next level, investors wonder if they should buy last year's 10 best or 10 worst performing sub-industries. History says, but does not guarantee, that investors Tune in to “Stovall on Sectors” Every Friday on the S&P Capital IQ YouTube channel www.youtube.com/SPCapitalIQ Please follow me on Twitter: @StovallSPCapIQ S&P Capital IQ For more information 1-877-219-1247 This report is for information purposes and should not be considered a solicitation to buy or sell any security. Neither S&P Capital IQ nor any other party guarantees its accuracy or makes warranties regarding results from its usage.
Redistribution is prohibited without written permission. Copyright © 2016 Standard & Poor’s Financial Services LLC, a part of McGraw Hill Financial, Inc. Redistribution, reproduction and/or photocopying in whole or in part is prohibited without written permission.
All rights reserved. STANDARD & POOR’S, S&P, S&P 500, S&P EUROPE 350 and STARS are registered trademarks of Standard & Poor’s Financial Services LLC. S&P CAPITAL IQ is a trademark of Standard & Poor’s Financial Services LLC. Please see required disclosures on last 2 pages. 1 .
The Barbell Portfolio 2016 10 Best 2015 Portfolio 10 Worst 2015 Portfolio S&P 500 Sub-Industries % Chg. Proxy S&P 500 Sub-Industries % Chg. Proxy Brewers 26.0 TAP $94 *** Aluminum (37.5) AA $10 **** Building Products 24.0 MAS $28 ***** Casinos & Gaming (53.5) WYNN $69 *** Construction Materials 35.0 VMC $95 **** Coal & Consumable Fuels (76.6) CNX $8 ***** Distillers & Vintners 31.9 STZ $142 ***** Department Stores (36.6) M $35 *** Footwear 30.0 NKE $62 **** Diversified Metals & Mining (70.8) FCX $7 **** Home Entertainment Software 64.7 EA $69 **** Homefurnishing Retail (36.7) BBBY $48 *** Internet Retail 83.4 EXPE $124 **** Hotel & Resort REITs (35.5) HST $15 *** Internet Software & Services 33.3 FB $105 **** Independent Power Producers (43.1) NRG $12 **** Oil & Gas Refining & Marketing 24.6 VLO $71 ***** Oil & Gas Exploration & Production (35.5) SWN $7 ***** Restaurants 22.1 SBUX $60 **** Oil & Gas Storage & Transportation (52.0) KMI $15 **** Source: S&P Capital IQ. Past performance is no guarantee of future results. would have done better buying and holding last year's three best-performing S&P 500 sectors, while avoiding the three worst. On the sub-industry level, however, history shows that they would have seen increased returns when owning both the 10 best and the 10 worst groups. From 1991 through 2015, the S&P 500 recorded a compound annual growth rate (CAGR) of 7.6%, excluding dividends reinvested. An equal weighting of the three best performing S&P 500 sectors from the prior calendar year, however, recorded a CAGR of 8.4%, and posted a 68% frequency of outperformance, or batting average of beating the market.
Yet the three worst prioryear performers saw below-market CAGR of 6.8% in the subsequent year, and beat the S&P 500 only 40% of the time. Therefore, history says that on a sector level, investors are advised to let their winners ride, rather than trying to buy low, with the intent of selling high later on. On a sub-industry level, however, things proved to be a bit different. The 10 best performing subindustries from the prior year, held in equal proportions, returned a CAGR of 12.1% since 1991, while the 10 worst performing sub-industries recorded a slightly better CAGR of 12.8%.
However, combining the 10 best S&P 500 sub-industries from the prior year with the 10 worst into a portfolio of 20 equally-weighted groups recorded a CAGR of 13.5% over this 25-year period. Finally, all three groupings (10 best, 10 worst and the 20-group Barbell Portfolio), outpaced the S&P 500 in two out of every three years since 1991. In 2015, the Barbell Portfolio underperformed the S&P 500, falling 6.9% to the S&P 500’s decline of 0.7%. The 10 best sub-industries gained 2.0% last year, but the portfolio’s average was dragged down by the 10 worst’s 18.3% decline. Sometimes the underperformance goes the other way, however.
In 2011, when the S&P 500 was also down slightly, the Barbell Portfolio posted a 4.9% drop, due to the 10 best’s 8.9% decline that was moderated by the 10 worst’s 1.1% gain. The accompanying table contains the 10 best and 10 worst sub-industries from 2015, their price performances in 2015 and the S&P 500 stock that serves as a proxy for the sub-industry. Since there are very few ETFs that mimic the composition of S&P 500 sub-industries, I used S&P Capital IQ’s MarketScope Advisor platform to screen for the companies within each sub-industry to serve as a proxy based on S&P STARS, market cap, and target price differential. S&P Capital IQ For more information 1-877-219-1247 So there you have it. History has shown that sticking with the leaders, rather than opting for the laggards, has been a successful sector investing technique over the past 25 years.
Buying last year’s top three S&P 500 sectors and holding them in equal proportions for the coming year produced a CAGR of 8.4% versus 6.8% for the bottom three sectors and 7.6% for the market as a whole. Even better, buying and holding the prior year’s 10 best performing sub-industries offered a substantially higher CAGR, as did last year’s 10 worst performers groups. Combining the 10 best with the 10 worst, however, delivered the best of both worlds: a CAGR of 13.5%.
As a result, one could say that the outcome of owning the good and the bad wasn’t so ugly after all. SECTOR WATCH 2 . Required Disclosures Glossary STARS Raking system and definition: ★★★★★ 5-STARS (Strong Buy): Total return is expected to outperform the total return of a relevant benchmark, by a wide margin over the coming 12 months, with shares rising in price on an absolute basis. ★★★★☆ 4-STARS (Buy): Total return is expected to outperform the total return of a relevant benchmark over the coming 12 months, with shares rising in price on an absolute basis. ★★★☆☆ 3-STARS (Hold): Total return is expected to closely approximate the total return of a relevant benchmark over the coming 12 months, with shares generally rising in price on an absolute basis. ★★☆☆☆ 2-STARS (Sell): Total return is expected to underperform the total return of a relevant benchmark over the coming 12 months, and the share price not anticipated to show a gain. ★☆☆☆☆ 1-STAR (Strong Sell): Total return is expected to underperform the total return of a relevant benchmark by a wide margin over the coming 12 months, with shares falling in price on an absolute basis. S&P Capital Ranking Definitions: Overweight rankings are assigned to approximately the top quartile of the asset class. Marketweight rankings are assigned to approximately the second and third quartiles of the asset class. Underweight rankings are assigned to approximately the bottom quartile of the asset class. S&P Capital IQ Quality Ranking Growth and stability of earnings and dividends are deemed key elements in establishing S&P Capital IQ's earnings and dividend rankings for common stocks, which are designed to capsulize the nature of this record in a single symbol. It should be noted, however, that the process also takes into consideration certain adjustments and modifications deemed desirable in establishing such rankings. The final score for each stock is measured against a scoring matrix determined by analysis of the scores of a large and representative sample of stocks. The range of scores in the array of this sample has been aligned with the following ladder of ranking. A+ Highest A High A- Above Average B+ Average B BC D Below Average Lower Lowest In Reorganization Required Disclosures Global Markets Intelligence (“GMI”) is a business unit of S&P Capital IQ. Standard & Poor’s Investment Advisory Services LLC (“SPIAS”) and McGraw-Hill Financial Research Europe Limited (“MHFRE”) (collectively, “GMI Investment Advisory Services” or “GMI IAS”), each a wholly owned subsidiary of McGraw Hill Financial, Inc., operate under the GMI brand.
GMI IAS provides non-discretionary advisory services to institutional clients and does not provide advice to underlying clients of the firms to which it provides advisory services. In the United States, advisory S&P Capital IQ services are offered by SPIAS, which is authorized and regulated by the U.S. Securities and Exchange Commission.
SPIAS does not act as a "fiduciary" or as an "investment manager", as defined under Employee Retirement Income Security Act (ERISA), to any investor. MHFRE, is authorized and regulated by the Financial Conduct Authority in the United Kingdom. Under the Markets in Financial Instruments Directive (‘MiFID’), MHFRE is entitled to exercise a passport right to provide cross border investment advice to European Economic Area (‘EEA’) States.
MHFRE has duly notified the Financial Conduct Authority in the United Kingdom of its intention to provide cross border investment advice in EEA States in accordance with MiFID. MHFRE trades as S&P Capital IQ, does not provide services to “retail clients” and only has “professional clients” as defined under MiFID. In the United Kingdom to the extent the material is a financial promotion it is issued and approved by MHFRE.
In Hong Kong, advisory services are offered by Standard & Poor's Investment Advisory Services (HK) Limited (“SPIAS HK”), which is regulated by the Hong Kong Securities and Futures Commission; in Singapore, by McGraw-Hill Financial Singapore Pte. Limited ("MHFSPL"), which is regulated by the Monetary Authority of Singapore; in Malaysia, by Standard & Poor's Malaysia Sdn Bhd (“S&P Malaysia”), which is regulated by the Securities Commission of Malaysia; and in Australia, by Standard & Poor's Information Services (Australia) Pty Ltd ("SPIS"), which is regulated by the Australian Securities & Investments Commission. In Korea, SPIAS holds a cross-border non-discretionary investment adviser license and it is registered with the Financial Supervisory Service (FSS).
SPIAS, MHFRE, SPIAS HK, MHFSPL, S&P Malaysia and SPIS, each a wholly owned subsidiary of McGraw Hill Financial, Inc. operate under the GMI brand. GMI IAS offers four broad categories of investment advice: (i) portfolio strategies; (ii) fund research and recommendations; (iii) asset allocation; and (iv) analyses of certain U.S. and European fixed income securities using its proprietary Risk-to-Price scoring methodology.
GMI IAS’ model portfolios (“model(s)”) are not collective investment funds. Assets managed in accordance with the models may lose money. GMI IAS is not responsible for client suitability and or the appropriateness of the service for the client. Any performance data quoted represents past performance.
Past performance is not indicative of future returns. With respect to the investment recommendations made by GMI IAS, investors should realize that such investment recommendations are provided only as a general guideline. There is no agreement or understanding whatsoever that GMI IAS will provide individualized advice to any investor. GMI IAS is not responsible for client suitability.
GMI IAS does not take into account any information about any investor or any investor’s assets when providing investment advice. GMI IAS does not have any discretionary authority or control with respect to purchasing or selling securities or making other investments. Individual investors should ultimately rely on their own judgment and/or the judgment of a financial advisor in making their investment decisions.
Investments are subject to investment risks including the possible loss of the principal amount invested. An investment based upon GMI IAS’ investment advice should only be made after consulting with a financial advisor and with an understanding of the risks associated with any investment in securities, including, but not limited to, market risk, currency risk, interest rate risk and foreign investment risk. SPIAS, MHFRE and its affiliates (collectively, S&P) and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user.
The Content is 3 . Required Disclosures provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages. Based on a universe of funds provided to SPIAS, SPIAS may include in a model portfolio or substitution list, if applicable, otherwise present as an investment option and/or recommend for investment certain funds to which S&P licenses certain intellectual property or otherwise has a financial interest, including exchange-traded funds whose investment objective is to substantially replicate the returns of a proprietary S&P Dow Jones Indices, such as the S&P 500. SPIAS includes these funds in models, otherwise presents them as an investment option and/or recommends them for investment based on asset allocation, sector representation, liquidity and other factors; however, SPIAS has a potential conflict of interest with respect to the inclusion of these funds.
In cases where S&P is paid fees that are tied to the amount of assets that are invested in the fund or the volume of trading activity in the fund, investment in the fund will generally result in S&P receiving compensation in addition to the subscription fees or other compensation for services rendered by SPIAS. Poor’s Ratings Services may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at: www.standardandpoors.com/usratingsfees. GMI IAS may consider research and other information from affiliates in making its investment recommendations.
The investment policies of certain model portfolios specifically state that among the information GMI IAS will consider in evaluating a security are the credit ratings assigned by Standard & Poor’s Ratings Services. GMI IAS does not consider the ratings assigned by other credit rating agencies. Credit rating criteria and scales may differ among credit rating agencies.
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