Sag Harbor Advisors ( “SHA”) is a Registered Investment Advisory company founded by James M Sanford, CFA, a 21 year veteran of Wall Street. SHA wanted to provide clients a performance fee oriented Advisor option, where fees vary depending on the portfolio managers performance, rather than compensating advisors on a fixed fee or commission regardless of portfolio construction.
SHA has chosen Interactive Brokers (IB) as its Custodial platform. SHA clients have accounts at IB, which look similar to regular brokerage accounts, except that they are managed under the discretionary authority of SHA. Clients may view their accounts on the IB website, observe returns, and transfer money in and out in a fee-free manner, similar to regular brokerage accounts. SHA collects its fee twice annually on July and January 1st of the year. There is no notification period if clients wish to terminate their client agreement with SHA. They may do so same day, with a lock up or notice period.
Sag Harbor Advisors invests in liquid stocks, focusing on high dividend value stocks, as well as closed end funds and ETFs, which are fixed income oriented. SHA also maintains a basket of short stocks, typically running between 20 and 50% of the long notional, consisting of high multiple, momentum driven stocks.
WHY SAG HARBOR ADVISORS?
For years, we have realized that people often give their money to financial planners who are more intensely focused on generating fees and commissions, and deliver poor, or market beta, returns. Financial planners often put investors in mutual funds from which they receive sales kickbacks of up to 5%, along with a portion of the annual expense ratio which can range from .75-1.5% , or whole life products that are inflexible and have embedded 7-10% commissions. In a zero interest rate environment, investors can no longer afford to pay this fee structure for such mediocre performance. In turn, after 20 years on the broker dealer side, it has caught our attention that brokers serving the retail and middle markets clients focus on high commissions offered by the firm to move the firms “key axes” and distribute the firms risk, rather than focus clients returns.
Clients of Sag Harbor Advisors with $3mm or more under management may chose a fee structure based entirely on performance, at 20% of returns. Clients with between $1,000,000- $3,000,000 are offered a management or wrap fee of .5% and a performance fee of 12.5% of returns. ( Subject to inimum net worth requirements of $2,000,000 independent of home equity)
There will be no Broker Dealer affiliation with respect to managing client funds. The funds will be mostly invested in value/dividend equities, as well as fixed income closed end funds and ETFs. The firm will also maintain short positions in high multiple momentum stocks as well as overbought stocks and indices . The firm will make frequent use of options strategies given our extensive background in derivatives. There will be very little use of open end mutual funds, given the large embedded fees which we feel are inappropriate for this low return environment.