SWING TRADE FORECASTER
Due Diligence Document
Prepared: February 2009
CONTENTS:
SECTION 1: BACKGROUND INFORMATION
SECTION 2: PRODUCT INFORMATION
SECTION 3: INVESTMENT METHODOLOGY
SECTION 4: RISK MANAGEMENT
SECTION 5: ADMINISTRATION / CLIENT RELATIONS
SECTION 6: COMPLIANCE / LEGAL
SECTION 1: BACKGROUND INFORMATION
CONTACT INFORMATION:
Company Name: Pickens Asset Management, LLC
Address: P.O. Box 592
Cape Girardeau, MO 63702-0592
Text/Phone: 573-382-3584
Email: info@swingtradeforecaster.com
Website: www.swingtradeforecaster.com
Name of contact(s): David Pickens
Title of contacts(s) Owner/Principal
STAFF INFORMATION:
How many employees does the firm currently have? 2
Functional breakdown showing the number of employees by working area:
Investment Professionals 1
Compliance 1
Sales 2
Client Service 2
Technology 2
Operations/Accounting 1
Research 2
Traders 1
*NOTE: Individuals may serve multiple functions
Does the firm have multiple office locations? If so, where are they located? NO
What is the greatest and least number of employees the firm has had in the last three years?
Maximum: 2
Minimum: 2
Explain any significant employee turnover. None
How does the firm attract new employees? N/A
Provide a brief background of key personnel (education, professional background):
Name: David Pickens
Title: Owner/Trader
Professional Credentials: Registered Investment Advisor Representative, holding Series 7 and Series 65 licenses.
Education & Business Background:
David L. Pickens was born in 1962, and earned a Business Administration degree from Southeast Missouri
University in 1984. From 1985 through 1996, Mr. Pickens was a partner in a local family-owned supply business.
Since college, Mr. Pickens has been an active trader, investor, and market timing system developer.
Other Business Activities:
Upon his father's retirement and the partners selling the business in 1996, Mr. Pickens remains under contract with
the new family owners of the supply business his father founded. He remains active as a trader and investor in the
markets. Approx. 10 years ago began testing and developing several investment strategies to make gains in both
an up or down market. Swing Trade Forecaster is one of those strategies.
COMPANY STRUCTURE:
When was the strategy established? 2006
Is the advisory firm a Registered Investment Advisor? Yes, Missouri Securities Division
Is the firm a broker-dealer? NO
Legal Structure: Limited Liability Corporation (LLC)
Firm’s current ownership structure and any changes in the last three years: 100% David Pickens
Are there any plans for further ownership changes? My son, Matthew Pickens, is webmaster and helps with
customer service and research. He work is being implemented into the business to develop a team approach and
provide business continuity for the firm.
ASSET MANAGEMENT ACTIVITIES:
Does the firm conduct any business other than asset management? NO
What are the firm-wide total assets under management? What percentage of the total firm-wide assets
are invested in the Swing Trade Forecaster strategy (if more than 1)? $600K
Which investor group does the firm primarily target? We are looking for clients with AUM between 25K
and up to $1m or more.
What is the minimum account size for each investment program? $25K
What is the average account size for each program? $85K
Show a breakdown of assets under management by investor type: 100% Individuals
Do you have custody of any accounts? NO
Who is/are the custodian(s) to the majority of your accounts? Rydex Investments
SECTION 2: PRODUCT INFORMATION
Provide a short description of all products (public and private, where disclosure is possible) of the firm:
The Swing Trade Forecaster investment strategy is offered, through Managed Accounts, by Pickens Asset
Management, LLC. The accounts are separate and individually owned by each client.
Does the firm specialize in any product or group of products? If so, please explain: Index market timing
Provide historical performance data for all products: The firm provides no "in-house" performance data. The
strategy has been tracked and signals verified by Timer Trac, an independent third-party.
State in which period performance is actual or pro forma (backtracked)? We only provide Timer Trac
verified real-time data. No back testing or pro forma scenarios.
Is performance net of fees to the investor? YES
What are the advisory fees associated with each program? How are advisory fees calculated (monthly,
quarterly)? $25K-100K = 2.90% annual, paid quarterly; $100K above = 2.25% annual, paid quarterly.
SECTION 3: INVESTMENT METHODOLOGY
Describe the firm’s research process: (Include internal vs. external research; qualitative vs. quantitative;
top down vs. bottom up) Through in-house research, we quantitatively evaluate the indexes we
track based on top-down investment perspective. A daily analysis is performed to determine which index(s) to
buy/sell/hold, with any uninvested portion invested in a money market fund.
Describe the firms’ portfolio construction process: After attractive index opportunities are found, we typically invest
the portfolio(s) in the appropriate investment vehicle(s). We typically maintain a large cash position the majority of
the time.
What investment vehicle(s) are used in the strategy? Leveraged index funds
What is the typical number of positions in the investment program? Min. 0%, 50%, Max. 100%.
How are positions sized? (Average long/short; Maximum long/short) Typically each index trade scales in and out of
its position in 50% increments. If no risk/reward trade is generated, the portfolio stays in the safety of cash.
What is the annual turnover for each strategy? 100%+
What is the average holding period? One week
Are investment decisions made by individuals or by committee? Individual.
If decisions are made by committee, please list all members of the committee.
Please detail all changes to investment philosophy since inception: During a period of rising stock prices
and lower volatility, the average holding period is 1 week or more. Recently, with declining stock prices and
rising volatility, we have adjusted for the increased market risk by reducing the average holding period to a
few days.
Does the firm employ any proprietary techniques? Those who claim their systems or operations employ
"proprietary techniques" usually do so to make their firm seem more sophisticated and complicated compared
to reality. We use simple technical analysis and risk management rules that compliment our psychological
trading style.
What is the firm’s competitive edge? Any edge we provide will be applying patience in waiting for the markets to
offer us favorable index to invest in. We react, not predict. Otherwise, we are happy to wait in cash for the market
to provide the next opportunity.
How sustainable is this competitive edge? As long as the markets cycle between fear and greed, we will have the
opportunity to provide absolute returns in both up and down market.
SECTION 4: RISK MANAGEMENT
Does the company maintain a written risk management policy? YES
Are portfolios/accounts transparent to clients? YES
PORTFOLIO RISK MANAGEMENT -
PERFORMANCE TARGET: N/A
RISK TARGET: *
DRAWDOWN ANALYSIS: *
Length:
Maximum drawdown from any peak:
Recovery:
CORRELATION ANALYSIS: *
BETA: *
SECTOR LIMITS: Rydex fund availability
* click Timer Trac medallion on website for current data
** Please fill in N/A if not applicable
SECTION 5: ADMINISTRATION / CLIENT SERVICES
Is the client account administration performed in-house? If performed in-house, please describe process:
The firm performs client services and in-house research, including making any trade portfolio changes, on a
daily basis. All "back office" administration and client services is provided by the custodian on a daily basis.
What is the frequency of performance reports/client statements to investors? Custodian issues trade
confirmations and monthly statements, as well as year-end statements. Performance data is provided daily
via the Timer Trac medallion link.
Can clients view accounts online? Yes, at custodians website How frequently is the site updated? Daily.
Where and how are trades executed (Omnibus vs. group trading)? Group Trading via the custodian.
Do the investments/securities that you trade generate commissions/12b-1’s? No commissions
Is tax reporting provided to investors? Yes, by the custodian
Does the company publish regularly in the press? We publish a blog on the strategy website which is
maintained and updated on a regular basis.
Has the company published or commissioned any research/white papers? Samples available on website.
SECTION 6: COMPLIANCE / LEGAL
Is the firm registered with any regulatory and/or supervisory bodies? Yes, Missouri Securities Division
If applicable, when was the most recent audit by an appropriate regulatory body? Were there any
deficiencies? If so, please explain: N/A
Are any lawsuits pending against the company? NO
Does the company have a Compliance Officer? YES
Does the company have a written compliance manual? YES
Does the firm maintain a Disaster Recovery Policy? YES
Code of Ethics? YES
Does the firm maintain trading guidelines? YES
How much of the firm’s or the partners’ money is invested in each product? 100% of liquid investable
assets. We would never recommend to any client or potential client any strategy or program we have not
already invested in. When we say we will watch after your money as if it were our own, that's because it is.
Are there any conflicts of interest the investor should be aware of? NO
Please state the name and title of the officer(s) at your firm who have prepared and reviewed this questionnaire:
NAME: David Pickens
DATE: February 2009
TITLE: Owner/Principal
Return to Home
Due Diligence Document
Prepared: February 2009
CONTENTS:
SECTION 1: BACKGROUND INFORMATION
SECTION 2: PRODUCT INFORMATION
SECTION 3: INVESTMENT METHODOLOGY
SECTION 4: RISK MANAGEMENT
SECTION 5: ADMINISTRATION / CLIENT RELATIONS
SECTION 6: COMPLIANCE / LEGAL
SECTION 1: BACKGROUND INFORMATION
CONTACT INFORMATION:
Company Name: Pickens Asset Management, LLC
Address: P.O. Box 592
Cape Girardeau, MO 63702-0592
Text/Phone: 573-382-3584
Email: info@swingtradeforecaster.com
Website: www.swingtradeforecaster.com
Name of contact(s): David Pickens
Title of contacts(s) Owner/Principal
STAFF INFORMATION:
How many employees does the firm currently have? 2
Functional breakdown showing the number of employees by working area:
Investment Professionals 1
Compliance 1
Sales 2
Client Service 2
Technology 2
Operations/Accounting 1
Research 2
Traders 1
*NOTE: Individuals may serve multiple functions
Does the firm have multiple office locations? If so, where are they located? NO
What is the greatest and least number of employees the firm has had in the last three years?
Maximum: 2
Minimum: 2
Explain any significant employee turnover. None
How does the firm attract new employees? N/A
Provide a brief background of key personnel (education, professional background):
Name: David Pickens
Title: Owner/Trader
Professional Credentials: Registered Investment Advisor Representative, holding Series 7 and Series 65 licenses.
Education & Business Background:
David L. Pickens was born in 1962, and earned a Business Administration degree from Southeast Missouri
University in 1984. From 1985 through 1996, Mr. Pickens was a partner in a local family-owned supply business.
Since college, Mr. Pickens has been an active trader, investor, and market timing system developer.
Other Business Activities:
Upon his father's retirement and the partners selling the business in 1996, Mr. Pickens remains under contract with
the new family owners of the supply business his father founded. He remains active as a trader and investor in the
markets. Approx. 10 years ago began testing and developing several investment strategies to make gains in both
an up or down market. Swing Trade Forecaster is one of those strategies.
COMPANY STRUCTURE:
When was the strategy established? 2006
Is the advisory firm a Registered Investment Advisor? Yes, Missouri Securities Division
Is the firm a broker-dealer? NO
Legal Structure: Limited Liability Corporation (LLC)
Firm’s current ownership structure and any changes in the last three years: 100% David Pickens
Are there any plans for further ownership changes? My son, Matthew Pickens, is webmaster and helps with
customer service and research. He work is being implemented into the business to develop a team approach and
provide business continuity for the firm.
ASSET MANAGEMENT ACTIVITIES:
Does the firm conduct any business other than asset management? NO
What are the firm-wide total assets under management? What percentage of the total firm-wide assets
are invested in the Swing Trade Forecaster strategy (if more than 1)? $600K
Which investor group does the firm primarily target? We are looking for clients with AUM between 25K
and up to $1m or more.
What is the minimum account size for each investment program? $25K
What is the average account size for each program? $85K
Show a breakdown of assets under management by investor type: 100% Individuals
Do you have custody of any accounts? NO
Who is/are the custodian(s) to the majority of your accounts? Rydex Investments
SECTION 2: PRODUCT INFORMATION
Provide a short description of all products (public and private, where disclosure is possible) of the firm:
The Swing Trade Forecaster investment strategy is offered, through Managed Accounts, by Pickens Asset
Management, LLC. The accounts are separate and individually owned by each client.
Does the firm specialize in any product or group of products? If so, please explain: Index market timing
Provide historical performance data for all products: The firm provides no "in-house" performance data. The
strategy has been tracked and signals verified by Timer Trac, an independent third-party.
State in which period performance is actual or pro forma (backtracked)? We only provide Timer Trac
verified real-time data. No back testing or pro forma scenarios.
Is performance net of fees to the investor? YES
What are the advisory fees associated with each program? How are advisory fees calculated (monthly,
quarterly)? $25K-100K = 2.90% annual, paid quarterly; $100K above = 2.25% annual, paid quarterly.
SECTION 3: INVESTMENT METHODOLOGY
Describe the firm’s research process: (Include internal vs. external research; qualitative vs. quantitative;
top down vs. bottom up) Through in-house research, we quantitatively evaluate the indexes we
track based on top-down investment perspective. A daily analysis is performed to determine which index(s) to
buy/sell/hold, with any uninvested portion invested in a money market fund.
Describe the firms’ portfolio construction process: After attractive index opportunities are found, we typically invest
the portfolio(s) in the appropriate investment vehicle(s). We typically maintain a large cash position the majority of
the time.
What investment vehicle(s) are used in the strategy? Leveraged index funds
What is the typical number of positions in the investment program? Min. 0%, 50%, Max. 100%.
How are positions sized? (Average long/short; Maximum long/short) Typically each index trade scales in and out of
its position in 50% increments. If no risk/reward trade is generated, the portfolio stays in the safety of cash.
What is the annual turnover for each strategy? 100%+
What is the average holding period? One week
Are investment decisions made by individuals or by committee? Individual.
If decisions are made by committee, please list all members of the committee.
Please detail all changes to investment philosophy since inception: During a period of rising stock prices
and lower volatility, the average holding period is 1 week or more. Recently, with declining stock prices and
rising volatility, we have adjusted for the increased market risk by reducing the average holding period to a
few days.
Does the firm employ any proprietary techniques? Those who claim their systems or operations employ
"proprietary techniques" usually do so to make their firm seem more sophisticated and complicated compared
to reality. We use simple technical analysis and risk management rules that compliment our psychological
trading style.
What is the firm’s competitive edge? Any edge we provide will be applying patience in waiting for the markets to
offer us favorable index to invest in. We react, not predict. Otherwise, we are happy to wait in cash for the market
to provide the next opportunity.
How sustainable is this competitive edge? As long as the markets cycle between fear and greed, we will have the
opportunity to provide absolute returns in both up and down market.
SECTION 4: RISK MANAGEMENT
Does the company maintain a written risk management policy? YES
Are portfolios/accounts transparent to clients? YES
PORTFOLIO RISK MANAGEMENT -
PERFORMANCE TARGET: N/A
RISK TARGET: *
DRAWDOWN ANALYSIS: *
Length:
Maximum drawdown from any peak:
Recovery:
CORRELATION ANALYSIS: *
BETA: *
SECTOR LIMITS: Rydex fund availability
* click Timer Trac medallion on website for current data
** Please fill in N/A if not applicable
SECTION 5: ADMINISTRATION / CLIENT SERVICES
Is the client account administration performed in-house? If performed in-house, please describe process:
The firm performs client services and in-house research, including making any trade portfolio changes, on a
daily basis. All "back office" administration and client services is provided by the custodian on a daily basis.
What is the frequency of performance reports/client statements to investors? Custodian issues trade
confirmations and monthly statements, as well as year-end statements. Performance data is provided daily
via the Timer Trac medallion link.
Can clients view accounts online? Yes, at custodians website How frequently is the site updated? Daily.
Where and how are trades executed (Omnibus vs. group trading)? Group Trading via the custodian.
Do the investments/securities that you trade generate commissions/12b-1’s? No commissions
Is tax reporting provided to investors? Yes, by the custodian
Does the company publish regularly in the press? We publish a blog on the strategy website which is
maintained and updated on a regular basis.
Has the company published or commissioned any research/white papers? Samples available on website.
SECTION 6: COMPLIANCE / LEGAL
Is the firm registered with any regulatory and/or supervisory bodies? Yes, Missouri Securities Division
If applicable, when was the most recent audit by an appropriate regulatory body? Were there any
deficiencies? If so, please explain: N/A
Are any lawsuits pending against the company? NO
Does the company have a Compliance Officer? YES
Does the company have a written compliance manual? YES
Does the firm maintain a Disaster Recovery Policy? YES
Code of Ethics? YES
Does the firm maintain trading guidelines? YES
How much of the firm’s or the partners’ money is invested in each product? 100% of liquid investable
assets. We would never recommend to any client or potential client any strategy or program we have not
already invested in. When we say we will watch after your money as if it were our own, that's because it is.
Are there any conflicts of interest the investor should be aware of? NO
Please state the name and title of the officer(s) at your firm who have prepared and reviewed this questionnaire:
NAME: David Pickens
DATE: February 2009
TITLE: Owner/Principal
Return to Home
"What Does Due Diligence Mean?
1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts...
2. Generally, due diligence refers to the care a reasonable person should take before entering into an agreement or a
transaction with another party.
Investopedia explains Due Diligence-
1. Offers to purchase an asset are usually dependent on the results of due diligence analysis. This includes reviewing
all financial records plus anything else deemed material to the sale...
2. Due diligence is a way of preventing unnecessary harm to either party involved in a transaction." -Investopedia.com
1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts...
2. Generally, due diligence refers to the care a reasonable person should take before entering into an agreement or a
transaction with another party.
Investopedia explains Due Diligence-
1. Offers to purchase an asset are usually dependent on the results of due diligence analysis. This includes reviewing
all financial records plus anything else deemed material to the sale...
2. Due diligence is a way of preventing unnecessary harm to either party involved in a transaction." -Investopedia.com
| DUE DILIGENCE PROCESS |
This special report is intended to assist those performing due diligence and analyzing the risks. When
buying any asset, such as a business, both the buyer and seller analyze the viability of any transaction. Think of
investing with an Advisor in a Managed Account as a business. Investors should not invest in a business without
asking questions, learning about the management and trying to decide if the potential returns are worth the risk.
What do you recommend first? Read the disclosures, which are filings required by law, to get a basic understanding
of the registered investment advisor.
Second, the investment strategy website material will help you evaluate answers to the questions about honesty,
competency, as well as an overview for evaluating the strategy.
Third, institutions, family offices, pensions, charities, and other large investors have lengthy due diligence
questionnaires designed to get information about the advisor and strategy. It is our experience that these
questionnaires typically are very similar, so we have compiled these forms into one due diligence document.
Simply getting all of the information will not guarantee an investment will be a success. However, if you do your
homework, it is much more likely you will end up with an advisor and strategy that fits your investment philosophy.
"Due diligence is not a one time event to be performed before an investment; it is a continuous process for
as long as the money is invested with the manager." - John Mauldin, Author/Millennium Wave Investments
buying any asset, such as a business, both the buyer and seller analyze the viability of any transaction. Think of
investing with an Advisor in a Managed Account as a business. Investors should not invest in a business without
asking questions, learning about the management and trying to decide if the potential returns are worth the risk.
What do you recommend first? Read the disclosures, which are filings required by law, to get a basic understanding
of the registered investment advisor.
Second, the investment strategy website material will help you evaluate answers to the questions about honesty,
competency, as well as an overview for evaluating the strategy.
Third, institutions, family offices, pensions, charities, and other large investors have lengthy due diligence
questionnaires designed to get information about the advisor and strategy. It is our experience that these
questionnaires typically are very similar, so we have compiled these forms into one due diligence document.
Simply getting all of the information will not guarantee an investment will be a success. However, if you do your
homework, it is much more likely you will end up with an advisor and strategy that fits your investment philosophy.
"Due diligence is not a one time event to be performed before an investment; it is a continuous process for
as long as the money is invested with the manager." - John Mauldin, Author/Millennium Wave Investments
We understand that trust is the single most important element in the relationship between an advisory firm and its
clients. Our desire is to constantly increase that level of trust and confidence, and we would like to emphasize some
of the safeguards that we have implemented that gives a feeling of understanding, stability and peace of mind:
· Third-Party Custodian - Your account(s) are held with an independent custodian that is regulated and
monitored by independent regulatory bodies. We do not hold any of your assets.
· Separate Accounts - Your account(s) are maintained separately in your name by the third party custodian.
Your assets are never aggregated or commingled with our assets or the assets of any other client.
· Transparency - Account balances and all transactions in your account(s) are fully visible to you on a 24/7 basis
via the custodian's website, with trade confirmations and detailed account statements mailed regularly.
· Liquidity - Your assets are readily accessible. No "lock-up" periods or restrictions on additions or withdrawals.
· Availability - We pride ourselves on being readily available whether by email, text or phone. We will talk with you.
· Pay As You Go - As a "fee-only" Advisor under Federal and State regulations, we have a legal obligation to
put client interests first. Our firm does not sell any financial products or accept any "soft dollar" compensation.
clients. Our desire is to constantly increase that level of trust and confidence, and we would like to emphasize some
of the safeguards that we have implemented that gives a feeling of understanding, stability and peace of mind:
· Third-Party Custodian - Your account(s) are held with an independent custodian that is regulated and
monitored by independent regulatory bodies. We do not hold any of your assets.
· Separate Accounts - Your account(s) are maintained separately in your name by the third party custodian.
Your assets are never aggregated or commingled with our assets or the assets of any other client.
· Transparency - Account balances and all transactions in your account(s) are fully visible to you on a 24/7 basis
via the custodian's website, with trade confirmations and detailed account statements mailed regularly.
· Liquidity - Your assets are readily accessible. No "lock-up" periods or restrictions on additions or withdrawals.
· Availability - We pride ourselves on being readily available whether by email, text or phone. We will talk with you.
· Pay As You Go - As a "fee-only" Advisor under Federal and State regulations, we have a legal obligation to
put client interests first. Our firm does not sell any financial products or accept any "soft dollar" compensation.