Single Trend Following Strategy Responsible for Steady Gains Fueling Company’s Growth

RICHMOND, VA. – May 1, 2012 —The recession hammered many investment advisory companies. Sherwood Forest Capital Management, wasn’t one of them.

As it marks its fifth anniversary in 2012, Sherwood Forest, an investment advisory company based here, has prospered by successfully adopting elements of an alternative methodology, Trend Following, and making it its flagship investment program.

Alternative investments are becoming more mainstream in investors’ portfolios. Trend Following is a strategy that takes advantage of long-term moves that play out in various markets. The strategy seeks to benefit from both sides of the market, and profit from the ups and downs of the stocks or futures market.

Sherwood Forest was launched in 2007 by Mr. Douglas Stewart, who serves as Portfolio manager and Partner along with Mr. Joseph McDonald, who serves as the Co-Portfolio Manager and runs day-to-day operations. Mr. Stewart began focusing on stock market analysis over a decade ago while at Scott & Stringfellow in Richmond.

Mr. Stewart modified his version of the Trend Following program by reducing the traditional level of portfolio draw down to fit the risk tolerance of the firm’s retail investor client base.

The company’s objective, according to Mr. Stewart and Mr. McDonald. is to provide everyday investors with a strategy once reserved only for high net worth and institutional clients.

Sherwood Forest’s alternative investment program proved highly successful for clients as the company’s composite performance was positive four consecutive years through the recession from 2007 to 2010.

The firm’s Trend Following system returned over 41% from its inception to December 2008, and an additional 4% from that point through March 2012. This compares to the firm’s benchmark of the Dow Jones Credit Suisse Managed Futures Index, which returned over 31%, and 5%, respectively, for the same time periods. The S&P 500 index suffered a decline of -44% before rebounding 67%, respectively, for the same time period. Cumulatively, the total return for the Sherwood Trend Following strategy is +47.03% versus +10.51% for the S&P 500 Index since inception. On an annualized basis, the Sherwood Forest strategy is up 8.57% over the last five years, versus 2.01% for the S&P 500 Index. All performance data is as of 3/31/2012.

“We believe we have proven our value over the past five years, offering investors an excellent tool that deserves a spot in any portfolio blend, which embraces risk management,” said Mr. McDonald. “We compliment fundamental mutual funds or investment managers that deploy a mainly long-bias investment strategy as we expect our program will build significant profits when those long-biased managers are losing money.”

While most Trend Following strategies aim to profit from opportunities in a variety of asset classes often broadly represented in a portfolio, Sherwood Forest takes a slightly different approach. Sherwood Forest aims to allocate about 75% of the program to equity related trends. The other 25% of the portfolio seeks to profit from opportunities in Commodities, Fixed Income, and Currency markets.

Sherwood Forest Capital Management, an SEC Registered Investment Advisor, offers its strategy without any performance fees and uses Exchange Traded Funds rather than Futures.

In 2009, the company launched a mutual fund, the Sherwood Forest Alternative Fund to begin building a mutual fund track record for its Trend Following Program.

In 2011, the firm added a volatility focused overlay to their strategy to seek profits from spikes in overall equity markets volatility. The strategy is designed to be used in conjunction with the management of the Trend Following program, offering an opportunity to generate profits even during times when Trend Following is offering unfavorable short-term results. Sherwood Forest believes this volatility specific strategy will allow the Trend Following program to outperform other managers, who employ similar Trend focused strategies.

“Recognition of the current market environment is key to managing the risk in an investment portfolio,” said Mr. Stewart. “Markets either Trend or Consolidate. Thus a strategy that can dynamically change to fit either market environment offers a positive risk/reward at all times. We believe that our approach to both identifying and managing these constantly changing market conditions offers long-term value to our investors.”

Co-Portfolio Manager, Joseph McDonald was selected as a 2012 Rising Star of Mutual Funds, for the 19^th Annual Mutual Fund Industry Awards by Fund Industry Intelligence, Institutional Investor Inc., and sponsored by Putnam Investments.

Co-Portfolio Manager, Joseph McDonald will be a Panel Speaker for the 2012 Opal Financial Group Family Office & Private Wealth Management Forum, “The Race for Returns,” a private wealth series event in Rhode Island.

About Sherwood Forest

Sherwood Forest is an SEC Registered Investment Advisory firm with $15 million in assets under management. Sherwood Forest offers a mutual fund and direct investment programs in a managed account structure. We employ investment strategies which seek gains in bull markets and bear markets alike. Our strategy uses price and technical analysis rather than fundamental analysis. We are markedly different than many other investment products due to our lack of directional bias. The flagship investment program, Sherwood Alternative Program, is an ETF focused strategy that seeks to profit from positive and negative trends in equities, commodities, fixed-income and currency markets. For more information, visit http://www.sherwoodforest.us.

How Sherwood Forest “Follows” Trends; the investment team monitors a basket of 30 to 50 ETFs including inverse ETFs that mainly cover equity based indices and sectors. We monitor these ETFs and watch for price characteristics that reveal trends. These characteristics are based on technical indicators such as Price Channels, Moving Averages, Momentum and Strength indications, and Overbought and Oversold conditions. When an ETF reveals a set of bullish trend indications, we purchase an initial position in that ETF with a pre-assigned stop-loss on the position. We review inverse ETFs in the same way we evaluate normal ETFs, and as a result, we do not have a directional bias. This strategy is designed to capture trends to seek profits in both up and down markets alike.

Disclosure

This information does not constitute a solicitation or an offer to buy or sell any investment security, nor provide investment advice.

Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by the adviser) will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance, strategy and results of your portfolio. Performance results reflect the reinvestment of dividends and capital gains. The Sherwood Forest Alternative Program reflects the performance of fully discretionary accounts and excluded all non-discretionary commission based accounts between March 31, 2007 and August 31, 2007. After August 31, 2007 all accounts where fee based discretionary accounts and are included in the composite. The composite applies a quantitative approach to investing in ETFs which may represent long or short market segments. For comparison purposes the composite is measured against the S&P 500 Index. The inception of the composite is April 1, 2007. The U.S. Dollar is the currency used to express performance. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client‘s investment portfolio. An index such as the S&P 500 is a broad measure of the market performance of a specific group of securities in a particular market or sector. You cannot invest directly in an index. An index does not have an adviser, so its performance is not reduced by commissions or expenses. The Sherwood Forest Alternative Program performance (from 4/1/07 to 01/31/09) has been examined by Ashland Partners and Co. LLP.

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RICHMOND, VA. – May 1, 2012 — Sherwood Forest Capital Management sees today’s volatile stock market as the “New Normal,” and seeks to profit from it rather than trying to reduce volatility in its portfolios.

Due to the market’s volatility over the last three years, the Managed Futures and Trend Following sphere has experienced difficulty generating decent returns. Indeed, the equity markets in particular have had extended periods of trend-less motions accompanied by significant intraday and daily price volatility.

As a result, a raft of “low volatility” investment products –often termed “Managed Volatility Products” –have tumbled onto the market introduced by firms in an effort to satisfy the industry’s  increasing demand for low-beta products.

Sherwood Forest, an investment advisory firm based in Richmond, takes a contrarian view. The firm sees volatility in an entirely different way –a trend likely to be more part of the market’s usual activity going forward, and has introduced a special program designed so they can profit from both the market’s ups and downs.

“We observe volatility as the new normal, an environment borne out of the new complexities which exist in today’s financial market system that were less prevalent a decade ago,” said Mr. Joseph McDonald, a partner of Sherwood Forest Capital Management, and co-portfolio manager of the Sherwood Forest Alternative Fund.  “Rather than seek ways to reduce volatility in our portfolios, we look for ways to embrace it.”

Sherwood Forest introduces Path Volatility program

Reasoning investors can profit both ways from volatility –when the market is down as well as when it is up — Sherwood Forest has introduced a “Path Volatility” program, designed especially to focus on short-term trends and opportunities during volatile periods. During these periods the firm aims to build profits from these opportunities, by taking positions primarily in S&P 500 Index linked ETFs, including the Dow Jones Industrial Average linked products, Real Estate, and the MSCI Emerging Markets Index.

The Sherwood Forest program, Path Volatility, is used in the management of the Sherwood Forest offerings. (For more information, see www.PathVolatility.com)

Sherwood Forest is also offering this strategy as a standalone investment solution for the managed account industry.

“Either way in a volatile environment, a portfolio can aim to generate positive results with the Path Volatility program,” Mr. McDonald said. “Path Volatility can be considered an ideal investment solution for those looking to access a strategy which focuses on embracing volatility as a profit generator rather than a way to reduce one’s involvement in the financial market.

About Sherwood Forest

Sherwood Forest is an SEC Registered Investment Advisory firm with $15 million in assets under management. Sherwood Forest offers a mutual fund and direct investment programs in a managed account structure. We employ investment strategies which seek gains in bull markets and bear markets alike. Our strategy uses price and technical analysis rather than fundamental analysis. We are markedly different than many other investment products due to our lack of directional bias. The flagship investment program, Sherwood Alternative Program, is an ETF focused strategy that seeks to profit from positive and negative trends in equities, commodities, fixed-income and currency markets. For more information, visit http://www.sherwoodforest.us.

How Sherwood Forest “Follows” Trends; the investment team monitors a basket of 30 to 50 ETFs including inverse ETFs that mainly cover equity based indices and sectors. We monitor these ETFs and watch for price characteristics that reveal trends. These characteristics are based on technical indicators such as Price Channels, Moving Averages, Momentum and Strength indications, and Overbought and Oversold conditions. When an ETF reveals a set of bullish trend indications, we purchase an initial position in that ETF with a pre-assigned stop-loss on the position. We review inverse ETFs in the same way we evaluate normal ETFs, and as a result, we do not have a directional bias. This strategy is designed to capture trends to seek profits in both up and down markets alike.

This information does not constitute a solicitation or an offer to buy or sell any investment security, nor provide investment advice.

Disclosure

Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended by the adviser) will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client‘s investment portfolio. You cannot invest directly in an index. An index does not have an adviser, so its performance is not reduced by commissions or expenses.

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Currently it appears that this cyclical bull market (within the secular bear) remains intact for the time being.  But there are warning signs appearing on this important long-term chart.  If we compare the momentum of the overall market as it rose into the peaks in 2010 and 2011, the MACD (Moving Average Convergence Divergence)  reveals less momentum as the market continues to rise.  The momentum during into 2012 is still rising, but is very weak as compared to the peaks of the previous two years.

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On the monthly chart of the S&P 500 (shown below), we have seen a complete reversal of the previous bearish indications.  In 2000 and 2008, these indications did not reverse until an entire cyclical bear market played out.  We will not argue with the trend.  We note the primary change reversal and look for opportunities that are in line with that trend. Let’s take a look at some ETF’s that are offering favorable price action.

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If an investor was to combine two important investment concepts; that being “Trend Following” and “Contrarian Investing,” it would suggest that after coming out of a period of underperformance with a long term successful investment strategy, an investor would be positioning themselves in a favorable risk/reward in regards to the timing of such a strategy.

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 With the longer term charts attempting to join in the same trending direction of the daily and weekly charts, it suggests that one should not fight the tape.  If this new uptrend out of the 2011 consolidation period continues, it could be one of significant magnitude.  It is at this stage of a trend (the beginning) that it is most doubted.  There remain concerns about Europe, along with low volume in the markets.  These are reasons that many state as why they should be risk adverse and remain on the sidelines.  But the current price suggests otherwise.  We are seeing important trend development in many different areas of the financial markets.

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Since late Summer of 2011, I have noted the change of the primary trend to the downside for the first time since this important price trend turned up during the Q2 of 2009.  Today the primary trend remains down.  But there is underlying evidence that suggests that the primary trend may be at risk of changing again to the upside.  I am seeing indications of a reversal in the primary trend that did not appear in the downturns in early 2000 and late 2007.  

At Sherwood Forest, we are not “Perma Bear’s”  We are Trend Followers.  We have been following trends successfully for several years.  When the trends change, we change.  We find this strategy far superior to the concept of “forecasting” the future.  Another potential primary trend change brings up two important points that I would like to briefly discuss. At Sherwood Forest, we believe that risk management is paramount in long term investing success.  We employ several structural risk management strategies.

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 But now we have enough price evidence to suggest that over the second half of 2011 a clear technical formation can now be identified.  All of the price action during the second half of 2011 can be captured within the price “wedge” or “triangle,” as shown on the chart below.  This type of price formation shows an increasingly narrowing range of volatility.  As this volatility range becomes more and more compressed, it sets itself up for a powerful breakout in one direction or the other.  The triangle formation itself does not lend evidence to the direction of that breakout; only that it is coming very soon.

 In light of the recent change in the longer term primary trend turning down, along with the bearish alignment of key moving averages, there is currently a greater potential for the eventual breakout to be to the downside in my opinion.  

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 Although the RSI has recovered from its mid-line break to the downside, the price of the S&P 500 remains below a downward sloping 10 month moving average and the MACD continues to reflect a change to the longer term momentum.  Coordinated global central bank action has changed the direction of price in the short term.  But it remains to be seen if it can successfully alter the primary trend direction.  Can they really fix this problem by throwing more money at it?  

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 In fact, if we look at the bigger picture, it is becoming clear that 2011 appears to be a potential transitionary year between the cyclical bull market of 2009 through 2010 and the next cyclical bear market.  Every time the markets are brought back from the brink of disaster, it seems that the relative distance from the edge is less and less.  From a trending perspective, it looks as if the downward trend is developing, but so far this year, has not yet been allowed to reveal its true nature.

 The key question is when is this change in trend to the downside going to be recognized and how will you be positioned when the eventual outcome finally plays out.  Do not confuse this view as one of a “perma-bear”.  This view is driven by our focus on the “here and now”.  The price action suggests that the trend has taken a long term change in direction to the downside, and until things change, this perspective should prove to be the most beneficial.

 The challenge is to have the discipline to stay with the current evidence, while each and every rumor driven rally passes revealing greater weakness with each passing announcement.  It is impossible to determine which rally will be the final one before the trend takes hold and has a meaningful move in the direction of the developing trend.  The only way to insure ones success is to remain in line with the primary trend and manage through the counter trend rallies.  During these times, most investors become impatient and frustrated as the daily media drives their emotional decision making.  Their discipline is lost and replaced with the satisfaction of “moving with the crowd”, only to eventually have the primary trend reveal itself in a powerful and lasting move against the popular opinion of the day.

 Why is it that so few actually profit from investing?  It is because people generally do not have the discipline to avoid the comfort of moving with the crowd.  When things become uncomfortable, or frustrating, people want to move to a position of ease.  In fact, people will often feel better losing a lot of money, as long as everyone else is losing with them.  This has been the case for the last decade, and will continue to be the case.  In fact it has been the case for all of time.  That is why a disciplined trend following strategy will always win out in the long run.  And those who run with the crowd will always give their money to them.

-Doug Stewart, Founder and Portfolio Manager