November 2022
Executive Summary
Companies invest billions of dollars in political influence through lobbying, campaign contributions, and other means. However, as with other intangible assets, political capital tends to be overlooked by the market. We show how investors can earn excess returns buying undervalued political capital.
The Rising State
The Visible Hand
“When buying and selling are controlled by legislation, the first things to be bought and sold are legislators.”
💰P.J. O’Rourke
On Nov 8, 2022, the United States will conduct its midterm elections, which are on track to be the most costly ever. The election is expected to hinge on economic issues, which polls show are top of mind for voters given a faltering economy and spiraling inflation.
Exhibit 1
It’s the Economy, Stupid
Source: Gallup, Sparkline. As of 10/31/2022.
Even in our capitalist society, government plays a powerful role in private industry. Just this August, the Inflation Reduction and CHIPS Acts authorized around $670 billion in subsidies for our scientific, energy, and semiconductor sectors. These acts also impose price controls on the drug industry and a stricter corporate tax regime.
In addition to subsidies, price controls, and tax policy, the government has many other levers over the private sector. Policymakers are actively deliberating key economic issues, such as big tech antitrust, ESG mandates, Russia and China tariffs, and crypto consumer protection.
Exhibit 2
Government Matters
Source: Sparkline.
Of course, companies are very aware of the potential impact of government on their businesses. We see this reflected in a rising share of annual filings citing “regulatory risk.”
Exhibit 3
Regulatory Risk Disclosures
Source: SEC, Sparkline. We count the number of 10-K filings with the term “regulatory risk” in their risk factors section. As of 9/30/2022.
As a result, companies are highly incentivized to participate in the political process. Firms spend billions of dollars lobbying Congress, contributing to political campaigns, sponsoring ballot initiatives, and engaging in other means of political influence.
Intangible Investment ✨
In Investing in the Intangible Economy (Oct 2020), we argued that investors tend to undervalue intangible assets, such as brand, intellectual property, and human capital.
Political capital is another important intangible asset. Firms invest considerable resources building relationships with government officials. Presumably, they do this with the expectation of a positive return on investment, perhaps in the form of friendlier regulation or government patronage.
The following table summarizes ten research studies finding a positive return on political influence.
Exhibit 4
Return on Influence
Source: Sparkline.
In fact, these studies estimate returns on the order of a dazzling 20 to 200 times. This implies political spending has a considerably greater payout than that of other intangible investments, such as R&D or advertising.
Research also identifies specific channels through which firms realize this return. Politically connected firms obtain more FDA drug approvals, government contracts, bailouts, tax reductions, and regulatory relief. Political spending is indeed an investment that creates value for years to come.
Next, we will show that political spending not only generates returns for companies but also that these returns can be captured by stock market investors.
Lobbying
Investing in Influence
“Lobbying is the world’s second-oldest profession.”
🎙️Bill Press
Lobbying is the most obvious way that companies purchase influence. Each year, corporations and other interest groups spend $3 to 4 billion on lobbying. This spending grew rapidly until 2010 but has remained relatively steady since.
Exhibit 5
Total Lobbying
Source: U.S. Senate, Sparkline. As of 9/30/2022.
We have transparency into lobbying expenditures due to the Lobbying Disclosure Act of 1995 (LDA), which requires professional lobbyists to register themselves and their clients in a public database. Currently, there are around 12,000 active lobbyists in this database.
Most companies hire outsourced lobbying firms, although larger companies often also employ in-house lobbyists. Either way, all lobbyists must disclose both their clients and the amount spent in quarterly reports.
Client names are entered as free-form text, which can be quite messy. We use simple natural language processing (NLP) tools to map this field to company names. This allows us to track the lobbying activity of all companies over time. The next exhibit shows the public companies that spent the most on lobbying over the past twelve months.
Exhibit 6
Top Lobbying Public Companies
Source: U.S. Senate, S&P, Sparkline. Public companies only. Trailing 12-month lobbying spend as of 9/30/2022.
This list contains an interesting mix of firms. It has 3 tech giants, 4 defense contractors, 4 telecom giants, 3 healthcare companies, Altria and GM. Presumably, these firms lobby heavily due to their elevated government exposure (e.g., antitrust, net neutrality, smoking, defense contracts).
The LDA also requires lobbyists to specify the issues lobbied for each client. The next exhibit shows the top issues by total amount spent. If lobbyists lobby multiple issues for a single client, we allocate this revenue evenly across all issues.
Exhibit 7
Top Lobbied Issues
Source: U.S. Senate, Sparkline. Trailing 12-month lobbying as of 9/30/2022.
The most lobbied issues are those with a direct impact on the private sector. Taxes are the top issue, as they affect all companies. Budget appropriations and trade also feature prominently. Much lobbying is also aimed at issues specific to large, highly regulated sectors (e.g., healthcare, finance, defense, energy, telecoms).
This industrial bias can be seen in the next exhibit, which shows total lobbying spend for each GICS industry group.
Exhibit 8
Top Lobbying Industries
Source: U.S. Senate, S&P, Sparkline. Trailing 12-month lobbying spend as of 9/30/2022.
The pharmaceutical industry is the biggest spender on lobbying. Defense contractors (categorized under “capital goods”) finish in second place. Healthcare, media, software, utilities, and energy round out the top seven.
The problem with using total dollars spent is that it is biased toward larger firms with bigger overall budgets. In Intangible Value (Jun 2021), we build intangible value ratios by dividing intangible assets (e.g., PhDs, patents) by price. Similarly, we define Lobbying Yield as “lobbying expenditure per share divided by stock price.” This captures the amount of political capital that equity investors get per dollar invested.
The next exhibit shows the average lobbying yield for each industry group. Highly regulated industries such as utilities and telecoms remain at the top. On the other hand, software and media firms drop out, since their lobbying spend is only a small fraction compared to their huge market caps.
Exhibit 9
Industries by Lobbying Yield
Source: U.S. Senate, S&P, Sparkline. Lobbying Yield is scaled by millions. Trailing 12-month lobbying spend as of 9/30/2022.
Capitol Gains 🏛️
Now that we have a sensible way to rank firms based on their lobbying outlays, let’s see if these politically connected companies deliver excess returns for their shareholders.
Our strategy buys stocks in the top quartile of lobbying yield from the Russell 1000. The portfolio is equal-weighted and rebalanced monthly. The next exhibit shows its performance relative to an equal-weighted Russell 1000. While we exclude transaction costs, the strategy does not trade very often.
Exhibit 10
Lobbying Yield Backtest
Source: U.S. Senate, S&P, Sparkline. No transaction costs or fees. Market is equal-weighted Russell 1000. See important backtest disclosure. As of 9/30/2022.
Over this period, high lobbying yield stocks outperformed the market by 2.3% per year with remarkable consistency. After stumbling in the pandemic, the strategy came roaring back this year. Lobbying has rewarded not only companies but also shareholders.
The next table lists the positions in the current portfolio with the highest lobbying yield (which we scale by 1 million for readability). These 30 stocks all have lobbying yields over 200 with an average of 313. This is around ten times that of the average stock in the Russell 1000. We sort by industry group to highlight the diversity in business models.
Exhibit 11
Top Lobbying Yield Holdings
Source: U.S. Senate, S&P, Sparkline. Top 30 names by Lobbying Yield from top 1000 U.S. public companies (>$4.67B market cap). Lobbying is a trailing 12 month sum. Lobby Yield is defined as lobbying per share / price scaled by millions. As of 9/30/2022.
The portfolio spans a remarkable range of sectors, including trading (Coinbase, Robinhood), healthcare facilities (DaVita, Tenet, LHC), biotech, telecom, and government contractors (Textron, Leidos, General Dynamics). We also uncover H&R Block, which is infamous for lobbying against efforts to simplify the tax filing process.
The best represented industries are pharma and diversified financials. Interestingly, this is inconsistent with the industry averages from Exhibit 9. For example, while utilities have the highest average industry-level yield, they have no names in the top 30. Conversely, Invesco has the highest overall yield despite its industry being middling on average.
This suggests that firm-level dispersion within industries swamps the differences across industries. We confirm this by re-running our backtest on an industry-neutral basis. We find that the results are largely unchanged after taking away the model’s ability to make bets across industries.
Exhibit 12
Industry-Neutral Lobbying Yield
Source: U.S. Senate, S&P, Sparkline. No transaction costs or fees. Market is equal-weighted Russell 1000. Industry groups are equal-weighted subsets of the Russell 1000. See important backtest disclosure. As of 9/30/2022.
In summary, firms that invest a high share of their market cap in lobbying tend to outperform both the market and their industry peers. Political capital is like other intangible assets as it tends to be undervalued by the stock market.
Campaign Contributions
Money and Politics 🗳️
Over the past few decades, the amount of money spent on elections has steadily increased. The 2020 election was the most expensive in history at a whopping $14 billion. And the upcoming election is projected to be the most expensive midterm election ever at over $9 billion.
Exhibit 13
Electoral Price Inflation
Source: OpenSecrets, Sparkline. 2022 is projected. As of 9/30/2022.
However, corporations play only an indirect role in elections as they cannot donate directly to political candidates. Firms wishing to contribute financially to the electoral process can utilize two alternatives.
First, firms can sponsor Corporate PACs to solicit donations from affiliated individuals. However, not only is there a strict $5,000 donation cap, but most firms don’t bother to set up PACs. In the last election, Corporate PACs only raised $330 million, less than 2.5% of the $14 billion total. This is also a mere 5% of the $7 billion spent on lobbying over this period.
Second, the 2010 Citizens United v. FEC decision opened the door for corporations to donate directly to Super PACs. Super PACs can collect and spend unlimited sums but cannot coordinate with campaigns. In practice, however, corporations remain a small source of Super PAC funding (i.e., less than $200 million in the last election).
Popular anxiety concerning the role of corporate money in elections appears to be overblown. Over 95% of electoral funding comes from individual donors. So far in the 2022 election, the top five individuals alone contributed over $300 million, more than all Corporate PACs combined!
Exhibit 14
Top Individual Donors
Source: U.S. Federal Election Commission, Sparkline. Data for the 2022 election cycle as of 9/30/2022.
One interesting feature of campaign finance laws is that donors are required to disclose both their employer and occupation. Thus, if we look up “Citadel” we get not only Ken Griffin’s donations but also those of hundreds of his employees. This data is available not only to donation recipients but also the general public.
While most academic research focuses solely on donations from Corporate PACs, we also consider contributions from individuals. While checks from CEOs and their employees are technically personal donations, we would be surprised if politicians did not feel a bit beholden to the employers providing for their donors’ livelihoods.
We download hundreds of millions of individual donations from the Federal Election Commission database. We then map them to public companies based on employer name using NLP algorithms. The next exhibit shows the firms associated with the most total donations. In addition to the total, we break out Corporate PAC donations in parentheses.
Exhibit 15
Top Public Company Donors
Source: U.S. Federal Election Commission, Sparkline. We include the top 1000 U.S. public companies (>$4.67B market cap). Data covers the 2022 election cycle as of 9/30/2022.
The top three firms make the list due to 8-figure checks from their top executives. Other firms are here because of large contributions from their Corporate PACs (e.g., Chevron, Home Depot). A third group makes the cut due to direct donations from tens of thousands of ordinary employees.
We recognize that this data is imperfect due to dark money and other means of obfuscation. However, we will show that it still provides a useful measure of political influence.
Donor Power
The biggest corporate donors tend to be larger firms with more employees and wealthier executives. Similar to before, we define Donation Yield as “donations per share divided by price.” Not only does this adjust for company size, but using price as the denominator introduces a value orientation.
When viewed this way, our list looks quite different. While Blackstone still tops the rankings, the next highest names are now Carlyle, DaVita, Masimo, and Asana. These are smaller firms that punch above their weight politically.
Exhibit 16
Top Donation Yield Holdings
Source: U.S. Federal Election Commission, S&P, Sparkline. Top 30 names by Donation Yield from top 1000 U.S. public companies (>$4.67B market cap). Donations for 2022 election cycle. Donation Yield defined as donations per share / price scaled by millions. As of 9/30/2022.
Firms that spend heavily on lobbying also tend to have more politically active employees. This list contains many names from earlier, such as DaVita, H&R Block, and Boeing. In fact, 11 of the 30 stocks on this list also appear in the lobbying yield league table. The most notable exception is the lack of any pharmaceutical companies in the top 30.
This is apparent in the next exhibit, which shows the average donation yield for each industry group. The red bars denote industries that were in the top seven on lobbying yield (Exhibit 9). In addition to pharma’s decline, we see the rise of diversified financials, media, and software. We assume this is due to the many billionaire donors in these sectors.
Exhibit 17
Industries by Donation Yield
Source: U.S. Federal Election Commission, S&P, Sparkline. Donation yield is scaled by millions. Data for the 2022 election cycle as of 9/30/2022.
Next, we run a backtest on donation yield. We select the top quartile of stocks on donation yield from the Russell 1000. We sum donations over the previous two-year election cycle. The portfolios are equal-weighted and rebalanced monthly (to account for changes in stock prices).
Exhibit 18
Donation Yield Backtest
Source: U.S. Federal Election Commission, S&P, Sparkline. No transaction costs or fees. Market is equal-weighted Russell 1000. See important backtest disclosure. As of 9/30/2022.
Firms associated with greater political donations relative to their stock price have tended to outperform. The strategy beats an equally-weighted Russell 1000 by 2.2% per year. Compared to the lobbying yield strategy, the donation yield factor delivers a similar magnitude of returns with a bit less consistency.
As mentioned, most research focuses solely on Corporate PAC donations. We now test the incremental value of also including direct employee donations. We define Corporate PAC Donation Yield the same way as Donation Yield, except we only include donations from Corporate PACs. The next exhibit shows the performance of the two strategies.
Exhibit 19
Employee Donations Matter
Source: U.S. Federal Election Commission, S&P, Sparkline. No transaction costs or fees. Market is equal-weighted Russell 1000. See important backtest disclosure. As of 9/30/2022.
Donation Yield handily beats Corporate PAC Donation Yield, validating our original hypothesis that politicians receiving individual donations do indeed give credit to the employers of these donors.
Finally, we combine lobbying yield and donation yield to create a composite Influence Yield factor. The underlying factors are 40% correlated, so the performance benefit from combining them is modest. That said, the composite does iron out some noise, leading to a more intuitive portfolio and robust view of political capital.
Exhibit 20
Influence Yield Backtest
Source: U.S. Senate, U.S. Federal Election Commission, S&P, Sparkline. No transaction costs or fees. Market is equal-weighted Russell 1000. See important backtest disclosure. As of 9/30/2022.
Partisanship
The Federal Election Commission transaction data includes not only the donor but also the recipient. This enables us to trace the flow of funds all the way to the end recipient. Since we also know the political party (or at least broad ideology) of end recipients, we can assign party affiliation to individual donations.
For each company, we separately sum the donations made by employees to Democrat and Republican recipients. This allows us to calculate the share of donations to each party, from which we derive partisan split. The next exhibit shows results for several firms from across the political spectrum.
Exhibit 21
Partisan Companies
Source: U.S. Federal Election Commission, Sparkline. Data for the 2022 election cycle as of 9/30/2022.
On one extreme, almost all of the $1.8 million in donations from Twilio employees went to Democrats. On the other extreme, Schwab employee donations virtually all went to Republicans. Other firms are more politically balanced, with Ford being exactly evenly split.
What factors explain political orientation? First, fractures tend to form on industry lines. People working in energy, materials, and utilities tend to be more conservative. On the other hand, those in consumer services (i.e., restaurants, hotels, leisure, and education), media & entertainment, and technology are often more liberal.
Exhibit 22
Partisan Industries
Source: U.S. Federal Election Commission, S&P, Sparkline. Data for the 2022 election cycle as of 9/30/2022.
Second, party affiliation is strongly related to geography. The next exhibit shows the political bias of each state, which we compute by assigning donations to states based on the location of company headquarters. It looks very similar to the general electoral map. The northeast and west coasts are liberal, while the south and midwest are conservative.
Exhibit 23
Partisan Geographies
Source: U.S. Federal Election Commission, Sparkline. For each public company, we calculate the share of employee donations to Democrats and Republicans. For each state, we calculate the equal-weighted average across all firms with headquarters in the state. Shading is proportional to political bias. As of 9/30/2022.
We can also use our partisanship metric to build Democrat and Republican stock portfolios. For each Russell 1000 stock, we calculate the share of employee donations to each party. The Democrat portfolio consists of the quartile of stocks with the highest Democrat donation share, while the Republican portfolio is the opposite. We rebalance monthly.
The next exhibit shows the performance of Democratic stocks relative to Republican stocks.
Exhibit 24
Politics Is Mean-Reverting
Source: U.S. Federal Election Commission, S&P, Sparkline. No transaction costs or fees. See important backtest disclosure. As of 9/30/2022.
Over the past few decades, performance largely reflects the relative rise and fall of the technology and energy industries. Democratic stocks surged in the dot-com and Covid bubbles, only to later crash back to earth. Most importantly, there appears to be no persistent edge for either party. Investment returns are non-partisan!
Regulatory Moats
The Death of Competition
In Monopolies Are Distorting the Stock Market (Sep 2020), we discuss the rise of oligopolistic firms with huge profits and few competitors. We describe Warren Buffet’s predilection for stocks like Moody’s, which along with two other firms controls 95% of its market. The next exhibit shows several other companies Buffett owns in oligopolistic industries.
Exhibit 25
Buffett’s Monopolies 🏰
Source: Open Markets Institute, IBISWorld, Sparkline.
These oligopolistic firms enjoy high pricing power and fat profit margins. The puzzle is that normally in a capitalist system, one would expect juicy profits to attract capital, which would compete returns back to equilibrium. However, for the most part, challengers have not materialized.
As a result, we have seen a growing gap in the profits of market leaders relative to smaller rivals. As these profitable leaders become a larger share of the economy, they push up margins at the overall stock market level. Higher margins fuel higher valuations, leading to even higher stock prices.
Exhibit 26
The Profit Puzzle
Source: BEA (retrieved from FRED), Sparkline. As of Q2 2022.
Researchers have put forth two explanations for the rise of oligopolistic firms with mega-profits.
Intangible Assets: Intangible capital’s economies of scale produce winner-take-most outcomes that are a natural and efficient outcome in the digital age.
Regulatory Capture: Entrenched incumbents exploit rising government regulation to erect barriers to entry and collect regulatory rents.
In A Human View of Disruption (Feb 2021), we showed that dominant firms do indeed deploy more technology and intangible assets with powerful economies of scale (e.g., network effects). Once these firms attain a certain size, it is very challenging for new entrants to compete with them.
However, the monopolization of the economy is not simply a story of technology. Industrial concentration has increased across the board, including in old-economy sectors such as beer, mobile homes, dialysis centers, and baby formula.
It turns out that the rise of intangible capital is not the only big trend of the past half century. Government regulation has also been steadily rising. The Mercatus Center attempts to quantify the amount of regulation using NLP tools. They estimate regulation has nearly tripled from 1970 to 2021.
Exhibit 27
Rising Regulation
Source: QuantGov, Sparkline. As of 2021.
Some believe that firms are exploiting this rising regulation to deter competition and increase profits. Gutierrez and Philippon (2019) show “regulations drive down the entry and growth of small firms relative to large ones, particularly in industries with high lobbying expenditures.” Regulatory barriers may explain why high profits no longer attract new capital and competition.
It is likely that both intangible capital and regulatory capture contribute to the rise of oligopolistic firms. Investors betting on the mean reversion of profit margins and market leaders are implicitly short these two trends. Let’s hope they have a long investment horizon!
Regulatory Capture
Regulation tends to advantage existing players. Incumbents have decades to cultivate cozy relationships with regulators and build expertise navigating regulatory red tape. They also enjoy regulatory moats in the form of expensive and lengthy permitting processes that serve as a barrier to new entrants.
It follows that more regulated industries are at greater risk for capture. We provide some evidence in the next exhibit, which shows the performance (i.e., information ratio) of our political influence strategy on an industry by industry basis.
Exhibit 28
Regulatory Alpha
Source: U.S. Senate, U.S. Federal Election Commission, S&P, Sparkline. No transaction costs or fees. Returns relative to equal-weighted industry group portfolio. Information Ratio is annualized excess return / tracking error. See important backtest disclosure. Performance from 12/31/2001 to 9/30/2022.
The strategy delivers positive excess returns in 16 of the 24 industry groups. More importantly, it works best in highly regulated industries, such as healthcare, capital goods (i.e., defense contractors), financials, and utilities. The return on influence is highest where government matters most.
Even the government recognizes the problem. In Feb 2022, the Department of Defense published an alarming report on the State of Competition within the Defense Industrial Base. While the military could once choose from 51 contractors, decades of consolidation has whittled this to just 5. Worse, in several weapons categories (e.g., tactical missiles), it now relies on just 1-3 suppliers.
Exhibit 29
Consolidating Defense
Source: Commission on the Future of the US Aerospace Industry (2002).
The Department of Defense notes that:
“Insufficient competition may … remove pressures to innovate to outpace other firms, result in higher costs to taxpayers as leading firms leverage their market position to charge more, and raise barriers for new entrants.”
It’s exactly this insufficient competition, sometimes bought and paid for, that enables incumbents to enjoy sustained outperformance.
The Price of Power
“The value of any investment is, and always will be, a function of the price you pay for it.”
📚Ben Graham
While regulatory moats are powerful intangible assets, they do not alone guarantee a great investment return. Lockheed Martin may have an inimitable position, but if it is common knowledge, the stock will be priced as such. Buying $1.00 of political capital for $1.30 is a bad deal. In order to earn a good return, one must obtain assets at a good price.
We have been very deliberate to incorporate price into our political influence metrics. As you may recall, we define Lobbying Yield as “lobbying per share divided by price.” The goal is to capture how much political capital investors obtain for each dollar invested in the stock.
It turns out that this value-orientation is crucial for the strategy’s performance. We will show this by comparing our preferred Influence/Price metric to two alternatives.
Total Influence simply looks at total spending. As mentioned, this introduces a size bias since larger firms have bigger budgets and more employees (e.g., AT&T, Comcast, Alphabet, Boeing, Lockheed Martin).
Influence/Sales adjusts for size by dividing by sales. Since Influence/Sales = Influence/Price x Price/Sales, this effectively adds a Price/Sales term. As a result, it tends to favor expensive glamor stocks (e.g., Karuna, Palantir, ChargePoint, Robinhood, Illumina).
The next exhibit shows the backtested performance of all three variants of our influence factor.
Exhibit 30
Influence at a Reasonable Price
Source: U.S. Senate, U.S. Federal Election Commission, S&P, Sparkline. No transaction costs or fees. Market is equal-weighted Russell 1000. See important backtest disclosure. As of 9/30/2022.
The price-based metric greatly outperforms the other two formulations. Merely recognizing that political capital has value is insufficient for profiting in the stock market if this information is already priced in. Influence is only worth buying if it can be obtained at a good price.
In Intangible Value (Jun 2021), we argued that investors tend to overly focus on structured accounting data and ignore intangible assets, as they are harder to measure and slower to impact the bottom line. As a result, intangible assets tend to be undervalued. Our research has uncovered dozens of examples ranging from brand equity to human capital. We can now add political capital to this list!
Importantly, political capital is only 20% correlated with our other intangible pillars on average. Political capital captures an untapped dimension of intangible value, providing a valuable new arrow in our quiver!
Conclusion
Elections provide a helpful reminder of the government’s influence over private industry. However, influence is not a one-way street. Corporations also invest large sums to gain influence with powerful lawmakers.
We study two types of political investment – lobbying and political donations. We find that both are often undervalued by the market. We show that investors can build simple strategies using public data to identify undervalued political capital and earn excess returns.
The existence of such a strategy suggests the presence of regulatory capture. Increasing regulation may contribute to the rise of oligopolistic firms, which should be of concern to economists and policymakers.
Disclaimer
This paper is solely for informational purposes and is not an offer or solicitation for the purchase or sale of any security, nor is it to be construed as legal or tax advice. References to securities and strategies are for illustrative purposes only and do not constitute buy or sell recommendations. The information in this report should not be used as the basis for any investment decisions.
We make no representation or warranty as to the accuracy or completeness of the information contained in this report, including third-party data sources. This paper may contain forward-looking statements or projections based on our current beliefs and information believed to be reasonable at the time. However, such statements necessarily involve risk and uncertainty and should not be used as the basis for investment decisions. The views expressed are as of the publication date and subject to change at any time.
Backtest Disclosure
The performance shown reflects the simulated model performance an investor may have obtained had it invested in the manner shown but does not represent performance that any investor actually attained. This performance is not representative of any actual investment strategy or product and is provided solely for informational purposes.
Hypothetical performance has many significant limitations and may not reflect the impact of material economic and market factors if funds were actually managed in the manner shown. Actual performance may differ substantially from simulated model performance. Simulated performance may be prepared with the benefit of hindsight and changes in methodology may have a material impact on the simulated returns presented.
The simulated model performance is adjusted to reflect the reinvestment of dividends and other income. Simulations that include estimated transaction costs assume the payment of the historical bid-ask spread and $0.01 in commissions. Simulated fees, expenses, and transaction costs do not represent actual costs paid.
Index returns are shown for informational purposes only and/or as a basis of comparison. Indexes are unmanaged and do not reflect management or trading fees. One cannot invest directly in an index. The S&P 500 is a popular gauge of large-cap U.S. equities that includes 500 leading companies. The Russell 1000 Index consists of the approximately top 1000 U.S. stocks by market cap. The Russell 1000 Value (Growth) Index includes those Russell 1000 companies with lower (higher) price-to-book ratios and expected and historical growth rates.
No representation or warranty is made as to the reasonableness of the methodology used or that all methodologies used in achieving the returns have been stated or fully considered. There can be no assurance that such hypothetical performance is achievable in the future. Past performance is no guarantee of future results.