1. Strategic Corporate Governance Indexes
Investing in leadership
According to Frederick Rowe, former chairman of the Texas Pension Review
Board, pensions should invest in ways that bolster the S&P 500 and other
benchmarks. “The intelligent solution is not to take crazy chances to beat the
averages but to get the performances of the averages themselves up.”
Opportunity: We are seeking a long term relationship with an investment index publisher to
capitalize on our corporate governance research that enhances investment portfolio
performance.
Summary: Strategic Corporate Governance Indexes will use corporate governance “styles,”
known to be associated with business performance and superior stock yields, as their primary
portfolio screen. This screening methodology informs both long only-index and active
long/short risk-optimizing investment funds. Strategic Corporate Governance Investment
Indexes expect to not only deliver superior returns to investors, but also help improve business
and sustainability fundamentals that support higher stock valuations.
Background: Groundbreaking research conducted by Alex Todd of TE Research establishes a
strong correlation between various types of governance styles and overall business
performance1
. It reveals that corporate governance styles provide a valid screen for selecting a
passive equity investment portfolio (index fund) that outperforms most market and fund
indexes.
Our corporate governance approach, based on corporate governance
“styles,” allows us to uncover significant new value for both investors and
issuers. It provides an independent screen for selecting stocks that
outperform the market, allowing our funds to both diversify portfolio risks
and yield higher returns. The resulting investment choices also help guide
the evolution of corporate governance practices by informing boards about
how to align their corporate governance practices with strategic priorities in
ways that help management achieve their objectives.
1
“Corporate Governance Best Practices: One size does not fit all” - http://is.gd/cA8iDm (PDF)
2. Performance: Our research that studied 7,000 public companies (5,000 U.S. and 2,000 foreign)
for the strength of their corporate governance “styles” found that the 25 U.S. issuers with the
strongest style indicator for one of the four styles studied produced a 10.2% cumulative (14%
absolute) dividend-adjusted return for the period April 2006 to April 2010 – the proposed U.S.
Strategic Corporate Governance 25 Index.
The cumulative return for our
U.S. Strategic Corporate
Governance 25 Index over
this four year period
surpassed even the best
performing Russell index, the
Russell Top 200 Growth
Index.
Comparison of Cumulative Returns (for a Dollar invested on April 27, 2006)
Portfolio Risks: Independent analysis of our U.S. Strategic Corporate Governance 25 Index
portfolio by SurveyMonkey.com validates our claims and provides additional insights into risk-
adjusted performance.
0.85
0.90
0.95
1.00
1.05
1.10
1.15
1.20
1.25
1.30
1st yr 2nd yr 3rd yr 4th yr
Strategic
Corporate
Governance 25
Index
Russell 3000®
Index
Russell Top 200®
Growth Index
3. The U.S. Strategic Corporate Governance 25 portfolio receives the highest published PM Score
(3.5/5 Bananas), on par with the George Soros/Soros and two other funds.
For information about PortfolioMonkey.com scoring, see http://www.portfoliomonkey.com/home/faqs.