Enhanced Index Strategy

Fact Sheet Commentary

The Johnson Enhanced Index combines the benefits of both active management and index investing. We believe that a passive equity approach combined with an actively managed fixed income portfolio can consistently outperform the market over time with low volatility. The active management provides benefits of returns that are able to outperform the index and the ability to adapt to changing market conditions. Additionally, the portfolio benefits from the index investing approach of benchmark correlation, lower volatility and lower fees.

Our primary objective is to outperform the S&P 500 Index with low tracking error and comparable volatility by replicating the Large Cap Equity market using Index Futures, combined with short duration investment grade Fixed Income securities.

Strategy Overview

Johnson Enhanced Index believes our disciplined process can provide investors equity index-like price volatility while exceeding the total return of the index over all time periods. The objective is to generate consistent excess returns versus the S&P 500 with low tracking error.

Investment Philosophy

Our process combines a passive equity approach with an actively managed fixed income portfolio. Futures contracts track equity index returns, less an implied cost-of-carry. A short duration bond portfolio is expected to consistently outperformed cost-of-carry over time, providing the opportunity for alpha.

Portfolio Overview

The S&P 500 Index is replicated using futures contracts. Cash not held on margin is invested in an actively managed bond portfolio designed to outperform cost-of-carry, generating alpha for the combined portfolio.

Investment Guidelines

  • S&P 500 Futures Contracts paired with high-quality Fixed Income
  • Approximately 5% of portfolio held on margin / 95% invested in quality bonds
  • No portfolio leverage, no swap contracts, no third party risk
  • Fixed Income component is 100% Investment Grade
  • Diversification by Sector, Issuer, and Maturity
  • No derivatives, no junk, no foreign currency exposure
David Theobald
Meet the Portfolio Manager

David Q. Theobald, CFA

David joined Johnson Investment Counsel in 2013. He is a Fixed Income Senior Portfolio Manager and shareholder of the firm. David holds the Chartered Financial Analyst® (CFA®) designation. Prior to joining the firm, he worked at Fort Washington Investment Advisors and Cincinnati Financial Corporation.

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Fixed Income

We implement our proprietary Quality Yield investment approach across our suite of duration mandates with the objective of outperforming the market while maintaining a focus on downside risk management and comparable volatility.

Equity

Johnson Asset Management offers both enhanced return index capabilities and active equity solutions. We implement a repeatable and disciplined process that seeks to optimize return per unit of risk.

Mutual Funds

Johnson Asset Management’s Fixed Income and Equity solutions are accessible through our competitively priced mutual funds, which we have been providing institutional clients since 2000.

Disclaimer:

Important Information

Johnson Asset Management ("JAM") is a division of Johnson Investment Counsel, Inc. ("JIC"), an SEC-registered investment adviser. Registration does not imply a certain level of skill or training.

This information is provided for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any security. Any investment decision should be made based on an investor's individual objectives, financial circumstances, and risk tolerance.

All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results.

Portfolio holdings, characteristics, allocations, and investment guidelines are subject to change without notice and may differ for individual client accounts.

For additional information regarding the strategy, including investment objectives, risks, fees, benchmark information, performance disclosures, and composite-related information, please refer to the applicable strategy fact sheet and commentary.