Long-Short Managed Accounts


 

Long-Short Managed Accounts

Due to the fact that stock market returns for the last several years have been very volatile, investors have realized the need for the diversification of their assets from the traditional buy and hold long equity approach. Lang Asset Management has developed several alternative investments to provide a tool for the diversification of their assets. These alternative investments seek to enhance returns and lower risk.

Lang Asset Management's Long-Short Managed Accounts product is designed to provide positive absolute returns over a several year period while lowering overall risk for our clients in any market environment. We seek investment returns that are not correlated with overall stock market returns.

Stock investing has typically focused on finding undiscovered, undervalued securities that offer opportunities for capital appreciation. As the bull market has matured, it has become increasingly difficult to find stocks that satisfy these criteria. In fact, many stocks are now well discovered and substantially overvalued. Selling these overvalued securities short and buying undervalued securities long provides a hedged approach to the market.

Some investors have dual investment objectives: to profit from a rising and/or declining market, and not be restricted to being fully long or short at all times. Our Long-Short product is designed to meet these goals. Each portfolio will hold securities long and short with a maximum 80% weighting on either the long or short side. The percentage of stocks long and short will be determined by market conditions and individual security opportunities. We do not ultilize futures or options.

Many consultants require a “hedge fund” platform as opposed to separately managed accounts. We strongly disagree with this assessment, and aver that the greater risk is with the “fund” concept because of the lack of transparency. In today's uncertain environment one should insist on being able to access their portfolio online 24/7 to ascertain their current holdings and account value. You will have 100% confidence in our managed account concept that provides this access. In addition, one may redeem at any time, as opposed to a quarterly or annual limitation. Finally, our minimum account size of $100,000 is much lower than most hedge funds.

Initial positions typically represent 3 to 4% of the value of the portfolio, so a standard account will be well diversified (20-25 securities). Under certain circumstances the client will receive interest on the short cash balances. This may partially or totally offset the advisory fee depending upon the Federal Funds rate. We are pleased to have exceeded all comparable indices over this extended time frame.


Long-Short Composite Performance History - Net of Fees 12-31-00 to 03-31-08
 
Time Period Composite
Return (%)		 Dow Jones S & P 500 Nasdaq Nasdaq 100
12-31-00 to 12-31-01 10.12      -5.50      -12.04      -20.18      -31.90     
12-31-01 to 12-31-02 19.80      -15.00      -22.10      -31.35      -37.57     
12-31-02 to 12-31-03 2.27      28.28      28.69      50.75      49.42     
12-31-03 to 12-31-04 2.02      5.30      10.74      9.80      11.22     
12-31-04 to 12-31-05 3.93      1.72      4.91      2.56      2.46     
12-31-05 to 12-31-06 7.71      18.30      15.80      10.33      7.35     
12-31-06 to 12-31-07 11.32      8.85      5.50      10.45      19.27     
12-31-07 to 03-31-08 3.50      -7.02      -9.46      -13.91      -14.41     
Inception to Date
12-31-00 to 03-31-08 77.52      32.14      13.31      -2.42      -20.66     
Inception to Date-Annualized
12-31-00 to 03-31-08 8.24      3.92      1.74      -0.34      -3.14     

 

The following returns should give you a basis for understanding what should be expected under various market scenarios. For instance, the first two years witnessed declining markets, and our returns were excellent, both on a relative an absolute basis. On the other hand, the period from 2003 to present witnessed a strong up market, but because our bias is to the short side, the returns trailed the two averages, although they were still quite acceptable. So we expect to strongly outperform in down markets and modestly underperform in up markets.We believe that we are entering a period similar to the 2000-2002 timeframe, with all the attendant economic and market problems directly ahead, and that the magnitude of our returns will be quite favorable, similar to the earlier period. On the other hand, the prospect of experiencing another period similar to the parabolic blowoff from 2003, given current valuations and complacency, appear slim. In fact, we do not believe we will again witness such a blowoff for many years.You must decide whether you agree with this assessment.


Long-Short Composite Performance History - Net of Fees 12-31-00 to 03-31-08
 
Time Period Composite
Return (%)		 Dow Jones S & P 500
12-31-00 to 12-31-03 34.91      3.04      -11.82     
12-31-03 to 03-31-08 31.58      28.24      28.50     
Inception to Date
12-31-00 to 03-31-08 77.52      32.14      13.31     
Inception to Date-Annualized
12-31-00 to 03-31-08 8.24      3.92      1.74     

     

    1. Lang Asset Management, Inc.(LAM) is a portfolio manager that invests solely in U. S. based fixed income and equity securities. LAM is defined as an independent investment management firm that is not affiliated with any parent organization.
    2. Performance results reflect the reinvestment of dividends, gains and other earnings.
    3. The benchmarks are the Dow, S & P 500,Nasdaq Composite and Nasdaq 100. The benchmarks are used for comparison purposes and this comparison should not be understood to mean that there is necessarily a correlation between the performance returns of this product and the benchmarks.
    4. The management fee schedule is as follows:

      Maintenance Fee
      2.0% annually of the assets.
      Minimum Account Size- $100,000.
      Minimum Annual Fee -$2,000

      Performance Fee
      20% of the net gain (defined as the sum of all realized and unrealized gains and losses over a 12 month period). The concept of a "high water mark" is utilized.

    5. No alteration of composites as presented here has occurred because of changes in personnel.
    6. A complete list of firm composites and performance results is available upon request.
    7. It cannot and should not be assumed that future results will be profitable or will equal or exceed these model results. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities listed.

    Consultants increasingly recommending this asset class, similar to their endorsement of international equities as a diversification measure about a decade ago.

    For additional information and fee schedule click on Getting Started.

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