South Atlantic Capital is an independent registered investment adviser registered with the State of North Carolina and the Commonwealth of Virginia.
We are a research-focused boutique investment manager investing client portfolios directly in 20 to 25 companies. We feel we spend more time on research and less time than other firms on client service and business development. We try to provide value to clients by being performance driven. For clients preferring more comprehensive services, we have relationships with a few well- regarded family offices.
Doing our own research allows us to have a good deal of conviction and patience in our holdings and helps avoid emotional mistakes driven by market volatility, which are so detrimental to the long-term returns of the average investor. Situations in which there is a disconnect between the person directly involved in research and the person making the investment decisions are more prone to emotional mistakes, in our view.
We don’t invest in mutual funds or ETFs unless it’s for clients who want fixed-income exposure. This means that, for equity-oriented investors, there aren’t two layers of fees, which there often are at wealth advisers using mutual funds, so our fee structure – including very modest commissions which go to Charles Schwab who acts as our custodian – is generally lower than those instances in which there are two layers of fees.
South Atlantic Capital Management Group, Inc. claims compliance with the Global Investment Performance Standards (GIPS). The standards are used when creating performance presentations that ensure fair representation and full disclosure of investment performance results and are a prerequisite for many institutional investors seeking investment managers. To assist in our efforts, we engage ACA Performance Services, a leading provider in the industry, for GIPS consulting and verification services.
South Atlantic Capital has been independently verified for the period of Jan. 1, 1992 to June 30, 2018. Verification assesses whether: (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis; and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards.
Our Core Equity Composite has been examined for the periods of Jan. 1, 1992 to June 30, 2018. Since the length of the examined track record for this composite includes many downturns such as 2000-02 and 2008-09, it gives potential clients a good indication of how our strategy has fared over a full cycle of good markets and bad which both happen.
We also input our GIPS verified returns onto PSN’s database. PSN is one of the largest databases in the country used by institutions and high net-worth individuals seeking investment managers. We subscribe to their analytics, which allows us to show our potential clients how our performance ranks versus other managers on their database using similar strategies.
They track our returns gross of fees and net of fees against other large cap managers on the database, as well as our risk metrics, such as the lower volatility of our returns versus the market since inception (which we don’t consider that important) and our downside capture ratio, which measures how we do versus the market in down quarters, which we do consider important.
First, we are not market timers, which we believe is a failed strategy when you look at how badly the 20-year return for the average investor has trailed the market according to comprehensive studies by Morningstar and Dalbar Associates. We look to make long-term investments in 20 to 25 companies with durable competitive advantages, as evidenced by their returns on capital but with a defensive bias.
We don’t try to time markets but assume something bad will eventually happen and believe it’s very important to be disciplined about investing in companies that can withstand the downturns and have capital to deploy during the downturns when prices are attractive.
We seek an expected return that makes it difficult to find investments that meet our criteria when investor optimism is excessive. As a result, we tend to underperform in markets with high investor optimism, such as 1998-99 and 2006-07 but during the market’s 37.6-percent cumulative loss from 2000-02 our composite had a positive return, as it did during the market’s 19.7-percent loss from 2008-09.
For the year that ended Dec. 31, 2018, our returns rank in the top one percent gross of fees and top three percent net of fees versus the other 234 large cap core managers on PSN’s database. Other managers on the database include JPMorgan, Alliance Bernstein, Goldman Sachs, UBS Asset Management and Deutsche Bank.
What’s valuable about the results is that the defensive bias of our investment philosophy and process has again shown its consistency by performing well in a down market. In our view, the most important statistic for our clients – or anyone’s client – is long-term returns, which, by being disciplined about our process, our net returns since inception rank in the top one percent for all large cap managers on the database for the full period even though being compared to institutional managers with larger account sizes and therefore lower fees.
Much of that is due to our downside protection, which also ranks in the top one percent since inception. In our view, the downside protection has been very influential in clients staying invested and capturing significant long-term capital appreciation.
“Past Performance is Not Indicative of Future Returns”
Unfortunately, due to limited print space and required GIPS and SEC disclosures, we can’t discuss specific performance numbers but you can obtain a compliant presentation of our performance and the firm’s list of composite descriptions by contacting Florence Ellen at [email protected]
or (910) 763-4113.
South Atlantic Capital Management Group claims compliance with the Global Investment Performance Standards (GIPS*). The firm has been independently verified by Ashland Partners and its successor company ACA Compliance for the periods January 1, 1992 through June 30, 2018. Verification assesses whether (1) the firm has compiled with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designated to calculate and present performance in compliance with the GIPS standards. The Core Equity Composite has been examined for the periods January 1, 1992 to June 30, 2018. To receive a GIPS compliant presentation and/or the firm’s list of composite descriptions please email your request to [email protected] .
Since its inception January 1, 1992 through September 30, 2018 our Core Equity Composite performance ranks in the top 1% gross of fees and top 4 % net of fees versus all Large Cap managers on PSN Informais’s database. PSN is a global database of approximately 2,000 Investment Managers representing more than 20,000 domestic and international investment products, and it is a division of Informa Investment Solutions, Inc. South Atlantic Capital is measured against the Large Cap managers within the PSN database. There are 868 Large Cap Managers’ returns that are compared to the returns of South Atlantic Capital for the past year and 146 Large Cap Managers whose returns have been on the database since January 1, 1992. Rankings are not indicative of future performance.