The mission of the Hussman Funds is to serve our shareholders in a way that will improve lives. Our goal is not only to invest for long-term returns, but also to manage risk so that our shareholders can confidently maintain their saving and investment programs over the long-term.
Our commitment to shareholders includes low investment minimums, a long-term full-cycle focus, protections against late-trading in the Funds, Codes of Ethics and personal investment stakes that align our interests with those of our shareholders, regular and extensive shareholder communications, and a clearly disclosed, pure no-load structure for fees and expenses (no 12b-1 fees, soft-dollar commissions, trailing fee arrangements, or multiple share classes).
As part of our commitment to improving lives, the Investment Advisor to the Funds supports projects in medical research, education, and other charitable causes. These projects are funded solely through management fees earned by the Advisor, not by the Funds or shareholders. For more information, please visit the Hussman Foundation website.
We are pleased when an institution chooses the Hussman Funds as a steward of its endowment. We are equally pleased when a parent chooses the Hussman Funds as the steward of a child’s education IRA. Whether large or small, these investments involve profound trust. We accept this trust seriously, and are dedicated to managing these assets with care.
Our Commitment to Shareholders
$1,000 for regular accounts, $500 for IRA and gift to minors accounts, $100 for automatic investment plans (except for an IRA or gift to minors account, which must be in amounts of at least $50).
The objective of the Hussman Funds is to invest for long-term returns while managing risk. The Funds are intended for long-term investors following a disciplined saving and investing program. For this reason, the Funds impose a 1.5% redemption fee for investments of less than 60 days, even for exchanges between Funds. These fees become assets of the Funds for the benefit of shareholders. The Funds do not waive redemption fees in order to encourage investments by short-term traders, regardless of the potential size of those investments.
We prohibit late-trading in the Hussman Funds and have not entered into any agreements that would allow this activity. In accepting investments in the Hussman Funds through brokers and other financial intermediaries, the Funds rely on the legal and contractual obligation of these intermediaries that they are only processing mutual fund orders received from customers prior to 4:00 p.m. (Eastern time) for same day processing. The 4:00 trading cutoff is both a legal obligation and an implicit contractual requirement through the obligation of intermediaries to adhere to each Fund’s Prospectus. The Trust’s current master service agreement includes this cutoff explicitly, and includes indemnification provisions to further protect shareholders. Each intermediary accepting orders for the Hussman Funds is required to represent its adherence to these obligations under applicable regulations.
We believe that several aspects of the Hussman Funds substantially reduce the risk of late or predatory trading. These include the 1.5% redemption fee applied to holding periods of less than 60 days, a hedging approach that often reduces the short-term volatility of the Funds, and the unlikelihood of the occurrence of “stale” prices in the types of portfolio securities most often held by the Funds.
A Personal Stake in the Funds
We invest our shareholders capital as carefully as we invest our own. This is not simply a principle, but a matter of fact. The majority of Dr. Hussman’s financial assets are invested in the Hussman Funds. All Fund transactions by the Advisor, its employees, and the officers and Trustees of the Fund are subject to the same cutoff times and redemption fees as applied to every shareholder.
Code of Ethics
Our duty to our shareholders requires a demanding standard of ethical behavior. The Code of Ethics of Hussman Strategic Advisors (formerly known as Hussman Econometrics Advisors), the Investment Advisor to the Funds, prohibits the Advisor and the Advisor’s employees from engaging in any self-dealing transaction to the detriment of the Funds, or any manipulative practice toward the Funds. Access persons of the Investment Advisor having information regarding portfolio purchases, sales or holdings of the Funds are required to file quarterly transactions reports, which are reviewed to monitor and prevent any abuses proscribed by Rule 17j-1 under the Investment Company Act of 1940. In addition, the Hussman Investment Trust (the Investment Company) has adopted a similar Code of Ethics relating to the trading and activities of its principal executive officers.
A Focus on Both Return and Risk
We believe that investors ultimately care about risk as well as performance. For this reason, our objectives incorporate both long-term total return, as well as long-term return per unit of risk. Our goal is to outperform the broad stock and bond markets over the full market cycle (peak-to-peak or trough-to-trough) with less risk than experienced by passive approaches. Because this goal requires the ability to avoid risk during certain conditions, the Funds may not track overall market movements, particularly over short periods of time. There is no assurance that the Funds will achieve their objectives.
Emphasis on Shareholder Interests and Social Responsibility
In proxy matters involving the companies in which the Funds invest, we vote in a way that is intended to maximize the value of investments to shareholders, subject to reasonable standards of social responsibility. Any conflict between shareholder interests and the business interests of the Advisor are resolved in the way that will most benefit the shareholders of the Funds.
When voting proxy ballots, we give substantial weight to the recommendation of management, in an attempt to give the company broad flexibility to operate as it believes is appropriate. However, we consider each issue on its own merits, and the position of a company’s management will not be supported in any situation where we view it to be against the best interests of shareholders, or against reasonable standards of ethical conduct and social responsibility.
We strongly favor incentive compensation in the form of cash bonuses rather than stock or option grants. In contrast, we view stock and option incentive plans as hostile to the interests of shareholders, dilutive, subject to windfalls unrelated to financial performance, ineffective in enhancing the market value of equities, and poorly suited to increasing the long-term cash flows available to shareholders. We generally vote against stock and option incentive plans, and support expensing the full value of option grants on an accrual basis.
In contrast to option incentive plans, we generally vote in favor of employee stock purchase plans (i.e. availability of stock purchase by employees at a fixed discount to market value). Though we see such plans as less effective than bonus plans, they are acceptable as a legitimate employment benefit.
While we do not specifically restrict investments against particular industries such as tobacco, defense, nuclear power or other areas, we believe that corporate policy should adhere to reasonable standards of social responsibility. Proxy matters in this category, initiated primarily by shareholders, typically request that the company disclose or amend certain business practices. We believe that the marketing to minors of violent media, explicit material, or potentially addictive substances (alcohol, tobacco), or unrestricted availability having similar effect, is unethical and socially irresponsible. We generally vote in favor of resolutions to reasonably restrict such practices, provided that the actions required by the resolutions are sufficiently targeted and quantifiable.
We believe that companies with substantial manufacturing activities in developing countries can limit risks to reputation, reduce legal liability, and enhance financial stability by adopting well-articulated human rights policies. We generally vote in favor of adopting such policies, particularly with regard to safety and workplace conditions, provided that they do not include restrictive provisions that unduly limit the ability of the company to operate competitively, or the flexibility of the company to determine the size and compensation of its labor force.
We believe that shareholders should have voting power equal to their equity interest in the company and generally vote for proposals to lower barriers to shareholder action (e.g. limited rights to call special meetings, limited right to act by written consent). We will generally vote against proposals for a separate class of stock with disparate voting rights.
A complete summary of our proxy voting policies and procedures for the Trust can be found in the most recent Statement of Additional Information for each Fund, available on the Prospectus page of this site.
We believe that evaluating a mutual fund’s suitability for any investor requires a clear understanding of that fund’s investment approach. We provide extensive information about our investment approach, not only in the Prospectus of each Fund, but also in regular commentary about our investment outlook, special articles, and detailed analysis of market conditions.
We appreciate your investment in the Hussman Funds, and we are grateful for your trust.
– John P. Hussman, Ph.D.