April 10, 2017
To our stakeholders-
Sandhill closed the books on another fine quarter. For the first quarter of calendar 2017, our Concentrated Equity Alpha (CEA) product returned 10.6% net of fees vs. 5.5% for the S&P 500 Index.
Sandhill has delivered terrific equity performance over the last fifteen months. From 1/1/16 – 3/31/17, our CEA product has returned 30.0% net of fees vs. 15.6% for the S&P 500 Index. We have added considerable value for our equity customers.
Our short term Corporate Bond product continues to grow rapidly as it provides good current income to our customers with a very favorable risk profile. As of today (4/10/17), our Corporate Bond product has an average duration of 4.1 years and a weighted average yield to maturity of 4.4%. Given the five year Treasury currently yields 1.9% – we think our Corporate Bond product offers great value.
For the first quarter of 2017, our Corporate Bond product returned 1.0% net of fees vs. 1.2% for the Bank of America ML 3-5 year corporate bond index. All of the underperformance is due to the performance drag from the cash that has flowed into this product recently. We continue to be disciplined and will put up with some short term underperformance while we are patient in getting our customers’ capital to work. Our corporate bond investments are multi-year investments, and we will only deploy capital when we find advantaged pricing relative to the credit.
Sandhill continues to grow quickly. Assets increased $80 million in the first quarter of 2017 and now stand at $833 million. The growth in our asset base was a healthy combination of asset gathering and investment performance.
As we look out over the next decade, the drivers to Sandhill’s success have not changed. First (and always first) is our ability to find investment ideas that generate substantial wealth over time. This is a process that must be defined and repeatable – but the irony is that it is a creative and intuitive process that requires a cohesive team of talented and motivated people to execute. We are thrilled to have that here – and in the investment industry – that is the exception rather than the norm.
Addition to the investment team
Aaron VandeGutche will join the investment team in early May. Although we are delivering best in class performance, we always try and get better. While immediately helping the investment team, Aaron will also go through a multi-year learning process as he integrates into the team.
We have no other hires or departures, and I am very pleased by the stability and execution of the whole Sandhill team. They work very hard for you.
My best to everyone for a fantastic spring!
Edwin M. “Tim” Johnston III
Founder, Managing Partner
Sandhill Investment Management is a Registered Investment Advisor registered with the Securities and Exchange Commission. The U.S. dollar is the currency used to express performance. This report has been prepared for informational purposes only and is neither a solicitation to buy nor sell securities. Past performance is not a guarantee of future results. Investing involves risk, including the possible loss of principal. Performance may be materially affected by market and economic conditions. Investments may not be suitable for all investors. Third-party information contained in this report has been obtained from sources believed to be accurate; however, Sandhill Investment Management makes no guarantee as to the accuracy or completeness of the information. For a full list of Concentrated Equity Alpha and Corporate Bond Composite current holdings, position changes and recommendations for the preceding 12 month period please contact Shant Goubrial at (716) 852-0279 x 305.