Prime Momentum Product

Features:

Porter Capital ASX200 Prime Momentum is an active long only strategy focused on:

(a) Portfolio growth in “bull” markets; and

(b) Moving to a heavily weighted cash position to protect capital in “bear” markets.

Advantages:

· Moves to 100% cash in difficult economic conditions to protect capital from a sustained market downturn

· Is an active strategy and is well suited to lower tax vehicles such as superannuation funds

· The investment process is mechanical and therefore unemotional, disciplined and objective; an advantage particularly during difficult investment cycles.

Strategy:

Since its initial discovery by DeBondt & Thaler in 1985, the momentum effect has been documented and researched in many markets worldwide. Academic research has proven that strong initial momentum performance leads to outperformance over the medium to long term. Additionally, this research confirms that momentum based investing strategies can generate excess stock returns in globally. Porter Capital research shows the existence of excess returns to momentum based investment strategies in Australian stocks.

The investment strategy initially ensures that the overall market is displaying positive or negative long-term momentum.

If the long-term momentum of the market is determined to be negative, the portfolio will systematically move into cash to preserve capital. This ability to move to cash is a key differentiator when compared to fundamental investment portfolios and prevents the portfolio being caught in sustained market downturns, bear markets or “value traps”.

If the market is displaying positive momentum, the strategy then ranks companies within the S&P/ASX 200 based on price momentum and strength, then invests in the leading companies within this ranking. This ranking process is repeated on a monthly cycle.

The investment process is entirely objective and system driven. This is an important advantage in volatile and critical market conditions where fear, panic and the subsequent emotional and behavioural biases can negatively affect investments decisions.

The ASX200 Prime Momentum Model Portfolio provides good diversification opportunities for Advisers and asset consultants due to the products uncorrelated returns to core equity managers.

Within this context, the Model Portfolio compliments ‘Core and Satellite’ equity exposure approaches where the objective is diversification of style and strategy.