Brochures
View Brochure Letter to Representative Letter to Prospective Investor Mission
Active vs. Passive Strategies Program Descriptions Client Privacy Policy Proxy Voting Policy
Printable Brochure Printable Retirement Brochure
(ADV Part II available upon request)
Note: The above documents are in PDF format. You need to use a PDF viewer. If you don't have one, you can download Adobe Acrobat Reader for free.
Fee-Based, No Conflict of Interests
Accounts Registered in Client’s Name
Actively Managed Fund Portfolios & Variable Annuities
New Original Technology, Not Part of Wall Street
Harloff Capital Management, Harloff Inc.
Registered Investment Advisor
Alternate Asset & Risk Management Firm
795 Sharon Drive, Suite 226, Westlake, OH 44145
440-871-7278 or fax: 440-925-7875
e-mail: harloff@covad.net
web page: www.harloffcapital.com
Harloff Capital Management, Harloff Inc.
795 Sharon Drive, Suite 226, Westlake, OH 44145
440-871-7278 or fax: 440-925-7875
e-mail: harloff@covad.net
web page: www.harloffcapital.com
New Original Technology
Dear Representative:
Please utilize these packets only in a seminar or one-on-one presentations where a knowledgeable representative is able to represent Harloff Capital Management, Harloff Inc. We use an active management style that employs new and original technology for money management.
We can do investment seminars for you given proper notice and at least 20 potential buying units.
Our long-term goal is to help clients increase their wealth . It is recommended that clients evaluate our service over a complete market cycle period of about 5 years.
Harloff Capital Management, Harloff Inc.
795 Sharon Drive, Suite 226 , Westlake, OH 44145
440-871-7278 or fax: 440-925-7875
e-mail: harloff@covad.net
web page: www.harloffcapital.com
Dear Prospective Investor:
Based on your long-term investment objectives, Harloff Capital Management (HCM), Harloff Inc., offers portfolio management services employing mutual funds, variable insurance, and variable annuities. We stand apart from other fee-based registered investment advisors because HCM is based on a math and science beginning. With people living longer than ever, the need for higher investment return is obvious. Returns from bank CDs, fixed annuities, bonds, or passive buy-and-hold strategies may not be sufficient. We believe that active professional money management is the right choice for many investors. As a client of HCM, you can expect a high level of commitment and service. We do not have custody of client assets. All Funds remain titled in your name at the fund, insurance company, bank or trust company that is your custodian. We are fee-based to avoid possible conflicts of interest. We employ mutual funds, indexes, and variable annuities as investment vehicles. These vehicles provide for diversification with low trading costs. In our wrap-fee program we trade mutual funds at the institutional level to reduce costs and can access more than 1000 funds. And we can manage client accounts within existing 401(k) accounts. Clients are updated with trade confirmations from the custodian and quarterly statements, and clients communicate with us as often as they want.
Harloff Capital Management's unique NEW ADVANCED TECHNOLOGY and several investment plans allow each client and their financial advisor to customize their portfolio. We look forward to working with you to meet your financial goals.
Our investment programs include: (1) Variable Annuity-Asset Allocation, (2) Aggressive Growth-Asset Allocation, (3) Moderate Growth-Asset Allocation, (4) ProFunds-Asset Allocation, (5) Rydex-Asset Allocation, (6) Blend of Aggressive and Moderate Growth-Tactical Asset Allocation, (7) ETF-Asset Allocation, and (8) Gold-Asset Allocation.
Prior to becoming a money manager, Dr. Harloff earned a Ph.D. in Aerospace Engineering. His math modeling background led to the development of our new proprietary investment technology to benefit our clients. He specializes in computer simulation and modeling and obtained two turbo-machinery patents.
In industry he developed technology for the Space Shuttle, future single-stage-to-orbit vehicles, air-breathing propulsion, and other systems. His disciplined and scientific training in aircraft and rocket science helps our investing process . His stock market research began in 1970 and continues today. Harloff Inc. was formed in 1981 and registered as an investment advisor in 1994. In his article "Dynamic Asset Allocation: Beyond Buy-and-Hold", feature article in Technical Analysis of Stocks and Commodities magazine in January 1998, he illustrates how to beat the buy-and-hold strategy with dynamic Asset Allocation. One of his original proprietary indicators is the Harloff Value Index, HVI. This universal index quantifies investment opportunity in mutual funds, exchange traded funds, and indexes in many types of markets and countries. He continues to have Harloff Capital Management manage his own portfolios along side of client portfolios. I am confident that you will find our money management system able to perform in different kinds of markets.
Very truly yours,
Sally I. Harloff
Sally I. Harloff, President
Harloff Capital Management, Harloff Inc.
Mission
Our mission is to help clients obtain long-term lasting wealth.
Harloff Capital Management is a money management company serving individuals 
and corporations. HCM offers a disciplined investment system based on many years of original market research. We employ our proprietary disciplined investment process to manage portfolios of mutual funds, indexes, and variable annuities. We seek to be fully invested when markets go up, and to protect capital in periods when markets go down. We constantly monitor a large number of domestic and international funds and try to select winning portfolios. Our goal is to buy funds that are advancing and sell funds that are declining.
We build on clients’ dreams and work hard so clients don’t have to. Our investments are along side our clients’ money. Dr. Harloff, Ph.D., has developed our original investing strategies - no other company has our investment technology.
Active Strategies vs. Passive Strategies
Paragraphs A-F, following, inform investors about the need for a professional active money manager and show limitations of the passive buy-and-hold strategy.
- The average investor, with a sizable nest egg, needs a professional money manager. Dalbar Financial Services , of Boston, Ma., has published results of several studies of investor compound returns compared to the S&P500 compound returns for four time periods, see below. Over a 19-year period ending in 2002, the yearly compound return for the S&P500 was 12.22%, and average investor return was 2.57%. This could be due to selling out too late when the market goes down and waiting too long to go back into the market. Similar results are indicated for years ending in 1997, 1998, and 2000.
S&P500 and the Average Investor Compound Return
(% per year)*
1984-1997 |
1984-1998 |
1984-2000 |
1984-2002 |
|
S&P500, % |
17.1 |
17.9 |
16.29 |
12.22 |
Avg. investor, % |
6.7 |
7.25 |
5.32 |
2.57 |
*Reference: Dalbar Inc. Quantitative Analysis of Investor Behavior Study 1997, 1998, 2000, 2003 updates
B) The buy-and-hold passive strategy is a bread-and-butter investment style. Portfolio re balancing may be yearly. In contrast, HCM actively manages client portfolios with the goal of adding value. HCM trades mutual funds at the institutional level to keep trading costs low. We are compensated by management fees.
C)Modern portfolio theory (MPT) was developed in 1952. This work showed that diversified portfolios, with uncorrelated stocks, reduce portfolio volatility or risk. Yet, the return for a diversified portfolio is always less than the return of the top-performing asset. A major limitation of MPT is that accurate forecasts of investment statistics have to be made. These statistics (for return, return volatility, and statistical correlations of returns) generally are not accurate and computed portfolios are not optimal. These forecasts are usually based on historical data spanning from 3 to over 20 years. And with globalization in progress and technology advancing at a rapid pace it makes little sense to use long-term average statistics. Portfolio re-balancing is usually yearly or quarterly and this strategy sells winners and buys losers. These portfolios held losing positions during the bear market of 2000-2002. In contrast to passive portfolio allocation, HCM actively manages client portfolios and re balances portfolios more frequently than quarterly.
D) Demographic Investing is another popular strategy. Baby boomers, born from 1946 to 1950, are investing heavily in the stock market in the decade before their retirement, 2000-2010, to fund retirement programs. This investment fuels the stock market higher. Health and drugs sectors will be in favor as the boomers both age and demand more medical attention. In its simplest form, this is a buy-and-hold investment strategy of areas thought to be most cherished by the boomers. This strategy held stocks and did not sell out during the recent bear market.The theory is obviously incomplete since it did not predict the bear market of 2000 to 2002. In contrast, we believe that HCM’s performance based investing adds value over this strategy.
E) Index investing is another passive buy-and-hold strategy. To obtain good investment results the investor needs to know in advance which index to buy-and-hold. Many pensions, insurance companies, family offices, and individual investors employ index investing. In contrast we believe that HCM’s performance based investing, with Dynamic Asset Allocation, adds value over this strategy.
F) Myth: don’t asset allocate the market . Many investors do not want to asset allocate the market because they can’t do it. They swear by the buy-and-hold strategy to diversify, and don’t manage. Their plan is to re balance and over-diversify once a year. For the investor who bought and held the market in 1929, it took 25 years to get even. And for the buy-and-hold investor who bought in 1973, it took 7.6 years to get even. In addition, many buy-and-hold investors are over-diversified with too many holdings. Studies show that 6 to 9 uncorrelated stocks provide adequate diversification: portfolios of mutual funds need fewer than 6 to 9 funds since each fund usually holds about 100 stocks.
The dynamic asset allocation table below indicates you don’t have to be a perfect allocator to beat the buy-and-hold S&P500 strategy.
Returns for the S&P500
(1/1/1980-12/31/02)*
% per year |
|
Buy-and-Hold |
9.55 |
Missed 10 best days |
7.03 |
Missed 20 best days |
5.18 |
Missed 30 best days |
3.57 |
Missed 40 best days |
2.12 |
Missed 10 worst days |
13.44 |
Missed 20 worst days |
15.47 |
Missed 30 worst days |
17.18 |
Missed 40 worst days |
18.75 |
Missed 10 best & worst days |
10.83 |
Missed 20 best & worst days |
10.87 |
Missed 30 best & worst days |
10.78 |
Missed 40 best & worst days |
10.68 |
* Tandem Financial Services, Inc. Study
Program Descriptions 
At HCM we follow a new approach with our own unique proprietary investment models. No other company has our technology. These are:
- long-term relative model to rank funds. We combine several different HCM indicators to determine relative fund rank. We manage risk by usually selling funds low on the list and buying funds higher on the list.
- short-term absolute model to rank funds. We analyze fund and index data on a common basis. We manage risk by usually selling funds low on the list and buying funds higher on the list.
- dynamic portfolio theory model to determine optimal dynamic frontier portfolios of funds. We have developed a new approach to design optimal portfolios. We manage risk by usually selecting funds that are thought to belong to an optimal portfolio.
- dynamic style theory model to determine the best style (growth/value/large/small) indexes and funds. Our original research is based on data from 1928 to 2002. We manage risk by usually investing in the best investment style.
- dynamic investment allocation model to determine buy and sell signals for the S&P500 and NASDAQ indexes. Our original research is based on data from 1942 to 1998, and more recent data. We manage risk by usually selling funds and/or buying contrary funds during periods of perceived weak markets.
HCM offers several active investment programs for both variable annuities and our mutual fund wrap program. In addition, our strategies can usually be employed within client 401(k) accounts. Other programs can be tailored to specific needs since our proprietary technology is designed to be general and universal. Each of our programs employs Asset Allocation. Occasionally, money market and possibly contrary fund are used from 0 to 100% (of dollar amount) depending on market conditions. The objective of each is long-term capital appreciation. A description of these programs is given below.
- Variable Annuity-Asset Allocation: Suitable for the client who understands and accepts risk inherent in up to 100% exposure to either U.S. or international stocks, and who understands and accepts the risk of up to 100% exposure to an “inverse” fund during stressed markets. Portfolios usually consist of 1 to 6 positions. Invests in funds offered by a specific variable annuity insurance company that is also the account custodian.
- Aggressive Growth-Asset Allocation: Suitable for the client who understands and accepts risk inherent in up to 100% exposure to either U.S. or international stocks, and who understands and accepts the risk of up to 100% exposure to an “inverse” fund during stressed markets. This program generally invests in a wide variety of funds and fund families. Portfolios usually consist of 1 to 6 positions.
- Moderate Growth-Asset Allocation: Suitable for the client who understands and accepts risk inherent in up to 100% exposure to either U.S. or international stocks, and who understands and accepts the risk of up to 50% exposure to an “inverse” fund during stressed markets. This program generally invests in a wide variety of funds and fund families. Portfolios usually consist of 2 to 8 positions.
- ProFunds-Asset Allocation: Suitable for the client who understands and accepts risk inherent in up to 100% exposure in one or more sector, style-box, index fund, and international stock funds and accepts the risk of up to 100% exposure to an “inverse” fund during stressed markets. This program generally invests in ProFunds. Portfolios usually consist of 1 to 8 positions.
- Rydex –Asset Allocation: Suitable for the client who understands and accepts risk inherent in up to 100% exposure in one or more sector, style-box, index fund, and international stock funds and accepts the risk of up to 100% exposure to an “inverse” fund during stressed markets. This program generally invests in Rydex funds. Portfolios usually consist of 1 to 8 positions.
- Blend of Aggressive and Moderate Growth-Tactical Asset Allocation: Suitable for the client who understands and accepts risk inherent in up to 100% exposure to either sector, style-box, index funds, and international stocks and who understands and accepts the risk of up to 100% exposure to an “inverse” fund during stressed markets. This program generally invests in a wide variety of funds and fund families that may be positively or negatively correlated with each other. Portfolios usually consist of 1 to 8 positions.
- ETF-Asset Allocation: Suitable for the client who understands and accepts risk inherent in up to 100% exposure to any sector, style-box, index, and international ETF and who understands and accepts the risk of up to 100% exposure to an “inverse” ETF during stressed markets. ETF’s may be leveraged at the ETF level. Portfolios usually consist of 1 to 8 positions.
- Gold- Asset Allocation: Suitable for the client who understands and accepts risk inherent in up to 100% exposure to gold funds and money market funds during stressed gold markets. This program generally invests in Rydex or Profund gold and money market funds. Due to the high volatility of gold, clients are recommended to invest only about 20 percent of their total investment portfolio in this gold program.
Past returns do not insure future results. Inherent in any investment is the potential for profit and loss.
Harloff Capital Management Client Privacy Policy *
Harloff Capital Management (HCM), Harloff Inc., an independent money management firm and registered investment advisor, is committed to safeguarding the confidential information of it’s clients. We hold all personal information provided to our firm in the strictest confidence. These records include all personal information that we collect from you in connection with any of the services provided by HCM. We have never disclosed information to nonaffiliated third parties, except as permitted by law, and do not anticipate such a change in firm policy, and we are prohibited under the law from doing so without advising you first. As you know, we use financial information that you provide to us to help you meet your personal financial goals while guarding against any real or perceived infringements of your rights of privacy. Our policy with respect to personal information about you is listed below.
- We limit employee and agent access to information only to those who have a business or professional need to know, and only to nonaffiliated parties as permitted by law. (For example, federal regulations permit us to share a limited amount of information about you with a custodian or brokerage firm in order to execute securities transactions on your behalf, or so that our firm can discuss your financial situation with your accountant or lawyer.)
- We maintain a secure office and computer environment to ensure that your information is not placed at unreasonable risk.
- The categories of nonpublic personal information that we collect from a client depend upon the scope of the client engagement. It may include information about your personal finances, information about transactions between you and third parties, and information from consumer reporting agencies.
- For unaffiliated third parties that require access to your personal information, consultants, and auditors, we also require strict confidentiality in our agreements with them and expect them to keep this information private. Federal and state regulators also may review firm records as permitted under law.
- We do not provide your personally identifiable information to mailing list vendors or solicitors for any purpose.
- Personally identifiable information about you will be maintained during the time you are a client, and for the required time thereafter that such records are required to be maintained by federal and state securities laws, and consistent with ethical consideration and professional responsibility.
*Such statement is for compliance with the Gramm-Leach-Bliley Act of 1999.
Harloff Capital Management Proxy Voting Policy*
Harloff Capital Management (HCM), Harloff Inc., an independent money management firm and registered investment advisor, does not vote proxies. Thus, clients who want to vote proxies must do so independent of HCM.
*Such statement is for compliance with new rule 206(4)-6 under the Advisers Act.