Risks and Rewards of Investing in DUNN
Risks
Investors should be aware of the volatility inherent to DUNN’s trading programs. Because the same portfolio risk profile is intrinsic to all DUNN programs, investors in any DUNN program can be expected to experience volatility similar to DUNN’s $-Weighted Composite record.
During 32 years of
trading, the composite record, on a month-to-month basis, has experienced
ten serious peak-to-valley losses ("drawdowns") exceeding 25%.
The tenth such loss, which began March 2003, is ongoing and currently
at 50.0%. The most serious drawdown in DUNN’s entire history occurred
over a four-month period which ended in February 1976 and amounted to
52%.
Clients should be prepared to endure similar or worse periods in the future.
The inability (or unwillingness) to do so may very well result in un-recouped
serious losses, without the opportunity for subsequent recovery.
For
additional disclosures on the Composite graph:
Risk
Management
DUNN portfolios are
designed to have a 1:100 chance of losing 20% or more in any given month.
The track record of the DUNN $-Weighted Composite has come very close
to this target in that a calendar month loss of 20% or more has occurred
on only 5 occasions during it's 384-month history.
The below graph depicts the rolling 48-month standard deviation of DUNN's composite performance over it's 32-year history. Although DUNN's returns vary considerably from month to month, it can be easily seen that over a longer investment horizon (4 years) the volatility is remarkably constant.
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Alternative investments such as managed futures investments are speculative, involve substantial risk, and are not suitable for all investors.
Rewards
Superior
Returns
On a $-weighted composite*
basis, a hypothetical investment of $1,000 in October 1974 would have
grown to $277,088 as of the end of September 2006, a compound annual return
of 19.22% after all fees and expenses.
For
additional disclosures on the Composite graph:
* The DUNN Composite is a 32-year long $-weighted average of programs designed and traded by DUNN.
An investment in a DUNN program should be considered a long-term investment. The next few graphs depict the benefit of adopting this long-term view (3 to 5 years).
The first graph is rolling 12-month returns. You can see there are quite a few losing 12-month holding periods.
When the holding period
is increased to 36 months, there are very few losing holding periods.
Extending one's investment horizon even further to 60 months shows that a losing 5-year investment is extremely rare. The average 60-month holding period yielded a total return of over 200%.
Alternative investments such as managed futures investments are speculative, involve substantial risk, and are not suitable for all investors.
32-Year Track Record
DUNN's extraordinarily long track record affords client confidence
for one principle reason: robustness. Anything less could not have withstood
the test of time.
DUNN-managed accounts endured and prospered through 32 years of wars, rumors of wars, economic turmoil, political scandals, floods, droughts, market crashes, contested elections and barbaric terrorist attacks.
Non-Correlation
DUNN's Composite returns are not correlated with the returns from traditional asset classes.
Because of DUNN's lack of correlation to traditional portfolios, and because of DUNN's high historic returns, adding DUNN to a portfolio lowers overall portfolio risk for the same level of return, despite the volatility inherent in DUNN's returns.
In
the graph below, the data has been filtered to show DUNN's returns during
only those months in which the S&P 500 lost 6% or more.
For
additional disclosures on the Composite graph:
The next graph depicts DUNN's and the S&P's performance during major
market crises. As you can see, an investment in DUNN often acts as a
hedge against unpredictable market crises.
This last graph is a scatter plot of DUNN's returns and the S&P's,
for all 384 months of DUNN's existence. This shotgun pattern is the
hallmark of zero correlation.
Alternative investments such as managed futures investments are speculative, involve substantial risk, and are not suitable for all investors.
Fee Structure
DUNN's fees are incentive only: 25% of net new trading profits (after making up losses), paid monthly.
Three
important points:
1) DUNN does NOT "dial up" leverage after a period of losses
to speed in the subsequent recovery.
2) Because we do not charge an asset-based management fee, there is
no incentive to accumulate assets under management. Our only incentive
is to generate new trading profits.
3) A substantial portion of each DUNN employee's personal wealth is
invested side-by-side with our clients'. Our interests couldn't be any
more aligned with our clients'.
Technique
DUNN's trading approach is 100% systematic trend-following. Performance is never a result of human judgment. In other words, we never override a signal.** Also, because our systems are 100% systematic there is no style drift. Generation to generation you can expect DUNN to trade in exactly the same way.
** The one exception to this was Y2K. Since we did not have any Y2K's in our database to test our system on, we did not feel it was prudent to be in the market. We also plan to exit the market for Y3K.
Transparency
DUNN has 100% transparency.
Liquidity
and Credit Quality
Only high volume markets on regulated, established exchanges are
traded; this translates into virtually no credit risk in that none of
these exchanges have ever defaulted on a single futures contract.
Alternative investments such as managed futures investments are speculative, involve substantial risk, and are not suitable for all investors.
Last Updated: October 11, 2006
Copyright © 2007 DUNN Capital Management, Inc.
All rights reserved