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Every investor knows that compounding investment returns is the key to wealth growth. Few investment professionals have been able to unlock the mystery of successful compounding techniques. AAC has found that properly matching Managers of securities is the essence of this mystery.

This chart is intended to graphically illustrate and quantify the compounding factors of the three Managers and Combinations thereof, compared to the S&P 500 Index and the U.S. 90 day T-Bill performance.

As can be seen in this chart, each Combination achieves an incremental compounding factor versus the individual Managers, which is the inevitable road to superior returns. In the next Exhibit, we shall show that by reducing drawdowns and the duration of same, compounding at times is dramatically improved.


  • Which is more important, the Compounding Factor as a percentage of the Combinations' returns, or as a percentage of the Market's?
  • How does this attribute help us to resolve the question of, what is the best allocation?

  • The latter is more important since 70 percent of the equity risk is that which is generated by the Market itself.
  • On the basis of this all-important attribute, Combination 3 is best.

    In making this comparison, it must be noted that Combination 1 and 2 fare lower than 3 as a result of the defensive nature of the Manager UP portfolio. The first two combinations are deliberately constructed to be more defensive, and are currently housed within the context of the longest Bull Market in recent history.

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