Clients at Sandhill had a spectacular year

For the year of 2017 (1/1/17-12/31/17), the Concentrated Equity Alpha (CEA) product returned 32.9% net of fees vs. 19.4% for the S&P 500 Index.

For the last two years (1/1/16-12/31/17), the Concentrated Equity Alpha (CEA) product returned 56.2% net of fees vs. 30.8% for the S&P 500 Index.

The returns produced by our investment team are best in class nationally.

Fixed income

For the year of 2017 (1/1/17-12/31/17), the Corporate Bond product returned 4.1% net of fees vs. 3.4% for the Bank of America 3-5 Year Corporate Bond Index.

For the last two years (1/1/16-12/31/17), the Corporate Bond Product returned 10.4% net of fees vs. 7.1% for the Bank of America 3-5 Year Corporate Bond Index.

A couple of notes on our bond performance. First, it is every bit as good as our equity performance. Second, short term interest rates went up sharply in 2017. When interest rates go up, bonds prices go down. That Sandhill has delivered a 4.1% return on a short term bond portfolio in a rising rate environment is a very good result.

The year end metrics of our Corporate Bond product are as follows: The weighted average duration (effective maturity) of the Corporate Bond product is 3.9 years so we have a short term portfolio which is good (and defensive) in a rising rate environment. The weighted average yield to maturity of the Corporate Bond product is 3.9% vs. the four year US Treasury yield of 2.2%.

Corporate vs. municipal bonds

While corporate bonds are a better deal than US Treasuries, we are constantly looking at whether corporate or municipal bonds are a better deal on a tax equivalent basis. For the past few years, corporate bonds have been the clear winner. With the new tax legislation, the tax equivalent yields for the two bond asset classes have gotten closer but corporate bonds still have better after tax yields (assuming the highest tax bracket). We continue to monitor the situation and will open a municipal bond product should conditions warrant. For tax deferred accounts, corporate bonds are still (and will remain) the fixed income asset class of choice.

Assets under management

On November 28, 2017, Sandhill passed $1 billion in assets under management. A big day for us (and you)! Consider that our assets under management grew $290 million in 2017 to $1.04 billion.

The rapid growth of Sandhill is a team effort and our clients are part of that team. As we grow and generate more cash as a corporation, we are able to invest more in our business to retain and grow our talented team of employees and work to deliver results for our clients to allow them to reach their financial goals.

New partners

I am pleased to announce that Mark Larry has been named a partner at Sandhill. He has also been promoted to Senior Equity Analyst. Mark has had a big hand in our equity results. He has worked tirelessly in both the generation of new stock ideas and coverage of our current portfolio. I think it is important to note that three of the four members of the equity research team are now partners that should be a good indicator of our priorities.

Marc Bernstein joined Sandhill as a partner in November. Marc was the largest producing salesperson for Manning & Napier in Western New York. We welcome Marc as a partner and look forward to him telling the Sandhill story in our community.

The Sandhill philosophy

Sandhill now has nine partners. I think that this is telling about who we are. It is important that we have true buy in from our employees at Sandhill so that we continue to deliver the superior returns that we have over the last fourteen years. The best way to do that is to make valued employees partners.

At the end of the day, it is about you, our clients, and we thank you for your ongoing support. We will continue to work hard to evolve our business, be prudent guardians of your capital, and deliver investment returns over time that add true value.

Happy New Year!


Edwin M. Tim Johnston III

Founder, Managing Partner


This report has been prepared for informational purposes only and is neither a solicitation to buy or sell securities. Third-party information in this report has been obtained from sources believed to be accurate; however, Sandhill makes no guarantee as to the accuracy or completeness of the information. Sandhill Investment Management (Sandhill) is a registered investment advisor with the Securities and Exchange Commission that is not affiliated with any parent company. Individual results may vary. Investments may not be suitable for all investors. Performance may be materially affected by market and economic conditions. Investment strategy has the potential for profit or loss. The performance statistics disclosed above are calculated on the rates of return from accounts managed by Sandhill, as defined below. The U.S. dollar is the currency used to express performance. Composites includes discretionary accounts under management from the first full month at which the account’s capital is fully invested by Sandhill. Closed accounts are included in the composites through the completion of the last full month under management and are not removed from the historical rates of return. Performance presented net-of-fees is reduced by investment management fees, trading expenses, and administrative fees. Interest, dividends and capital gains in Sandhill Composites are not immediately reinvested. CEA includes all portfolios in the all-cap core strategy which may hold large, mid, and small capitalization U.S. common stocks, American Depositary Receipts (A.D.R.s), domestic ETFs, sector ETFs, and cash. The S&P 500 Index is a float-adjusted market cap-weighted index of 500 of the largest US common stocks. The Corporate Bond composite will generally invest in securities rated single B to single A and will have maturities of three to nine years. The Bank of America Merrill Lynch 3-5 year Corporate Bond Index is a subset of the Bank of America Merrill Lynch US Corporate Master Index tracking the performance of US dollar denominated investment grade rated corporate debt publicly issued in the US domestic market. Referenced benchmarks are not available for direct investment. For a full composite presentation and/or the Firms list of composite descriptions, please call 716-852-0279.