A. Blue Bell is a limited liability company formed on March 29, 2005 in the Commonwealth
of Pennsylvania. Blue Bell became registered as an investment adviser firm in April 2005.
Blue Bell is principally owned by Jonathan Scott Miller, Sr. Jonathan Scott Miller, Sr.,
Justin Capetola, and Jonathan Scott Miller, Jr. are Blue Bell’s Managing Members.
B. As discussed below, Blue Bell offers investment advisory services to its clients (generally
comprised of individuals, high net worth individuals, pension and profit sharing plans,
corporations, business entities, trusts, estates, and other investment advisers). However, to
the extent that the client specifically requests, Blue Bell may provide limited consulting
services. Blue Bell’s investment strategy and its universe of investments may not be
appropriate for all investors, and clients and prospective clients should consider whether
Blue Bell is an appropriate choice for them.
INVESTMENT ADVISORY SERVICES
Blue Bell provides discretionary and non-discretionary investment management services.
Clients may also engage Blue Bell to provide financial planning and related consulting
services for an additional fee. Blue Bell relies primarily on its discussion with clients and
a Confidential Investment Questionnaire to determine a client’s investment profile, which
dictates a client’s investment strategy (discussed more fully below). It is important for
clients to understand that they must provide Blue Bell with updated information about their
financial situation and investment objectives so that Blue Bell can manage their account
appropriately. While Blue Bell generally makes efforts to meet with each of its clients
every year, and requests that clients update their Confidential Investment Questionnaire
from time to time, Blue Bell will manage a client’s account according to the client’s current
investment strategy. Clients and prospective clients should understand that if they do not
update their Confidential Investment Questionnaire on a regular basis, or communicate
with Blue Bell’s employees, Blue Bell may provide advice that is no longer appropriate for
the client.
Blue Bell’s investment philosophy involves allocating client assets to three primary
categories of investments—exchange traded funds (ETFs), closed-end funds (CEFs), and
structured investments. Depending on the amount of assets in a client’s account, and the
client’s age, financial resources and investment profile, we will manage a portfolio
comprised of some or all of these investments.
Generally, accounts with less than $15,000 will be invested entirely in ETFs and CEFs (the
“The Blue Bell Unhedged Strategy”). Accounts with between $15,000 and $100,000 will
typically be invested in ETFs, CEFs, and structured investments, but will typically be
invested at higher concentrations of ETFs than accounts with more than $100,000 (the
“Blue Bell Investment Strategy”). For accounts with more than $100,000, we will manage
a client’s account according to the “Blue Bell Hedged Strategy”, which typically includes
an allocation to ETFs, CEFs and structured investments. Based on our perception of the
markets, the Blue Bell Investment Strategy and the Blue Bell Hedged Strategy will use an
overlay of covered call writing and potentially other options trading strategies. The Blue
Bell Unhedged Strategy, Blue Bell Investment Strategy and the Blue Bell Hedged Strategy
are not model portfolios, and each client account is managed according to the client’s
strategy.
Unless a client notifies us in writing to the contrary, a client’s account will automatically
be placed in the strategy that corresponds to the amount of assets that they place under Blue
Bell’s management. Blue Bell may change a client’s strategy using its discretion. For
example, Blue Bell might do so after the value of the client’s accounts exceeds their current
strategy. In addition, Blue Bell may change the client’s strategy after consultation with the
client regarding changed investment objectives.
In any event, accounts with more than $15,000 may vary in their percentage of holdings of
ETFs, CEFs, and structured investments due to numerous factors, including but not limited
to:
• a client’s investment profile,
• market events and our perception of the strength and value of ETFs, CEFs, and
structured investments, and
• the “ladder” creation process for structured investments. Blue Bell makes
investments in structured notes on a laddered basis, and therefore, it takes time to
reach a targeted asset allocation. As a result, other asset classes (i.e., ETFs and
CEFs) will have proportionally higher allocations.
As discussed above, and when deemed appropriate, the Blue Bell Investment Strategy and
the Blue Bell Hedged Strategy will engage in covered call writing and potentially other
options trading strategies. Each of these types of investments and their risks are discussed
in greater detail in Item 8 below.
Blue Bell makes investments (or recommend that the client make investments) that are
consistent with the client’s current investment strategy and investment profile. Blue Bell
also assigns each client an internal risk score that takes into consideration the client’s
investment objectives and its perception of all the client’s household’s accounts that we
manage. We use this risk score to guide our management of their accounts. Blue Bell
manages clients’ accounts on an ongoing basis by purchasing and selling investments as
needed to keep a client’s account consistent with the client’s risk score and the account’s
strategy.
A CEF is a type of registered, pooled investment fund. CEF's have a fixed number of shares
that are traded on a stock exchange throughout the day. Because CEFs trade on exchanges
(as opposed to being redeemed directly through the issuer at the close of business), they
can trade at a discount to their net asset value. Blue Bell generally seeks to purchase CEFs
that are trading at a discount (i.e., when their trading price is less than their net asset value.)
While CEFs have a wide array of investment strategies, Blue Bell seeks to invest in high
quality, diversified CEFs.
With respect to structured investments, Blue Bell typically recommends and selects
structured notes or similar vehicles, which are financial instruments that combine two
elements: a debt security and exposure to an underlying asset or assets. These instruments
are similar to notes in that they carry counter-party risk of the issuer. However, the return
on these instruments are linked to the return of an underlying asset or assets (such as the
S&P 500 Index or commodities). It is this latter feature that makes these instruments
unique, as Blue Bell believes that the payout can be used to provide some degree of
principal protection, leveraged returns (but usually with some ceiling on the maximum
return), and be tailored to a specific market or economic view. In addition, investors may
receive long-term capital gains tax treatment if certain underlying conditions are met and
the investment is held for more than one year. Blue Bell does not view these investments
as an alternative to traditional fixed income. For investors in the Blue Bell Investment
Strategy and the Blue Bell Hedged Strategy, Blue Bell will create a ladder of these
investments in client accounts with different maturity dates to provide reinvestment
opportunities.
As a general matter, Blue Bell generally recommends that its clients complete and submit
options trading and margin authorizations for their accounts with the custodian. If a client
wants to restrict or prohibit Blue Bell from trading options in their account, then they
should notify our Chief Compliance Officer at the email address listed on the cover page
of this Brochure.
Not all investment advisers share the same investment philosophy as Blue Bell and Blue
Bell believes this is what sets it apart from other investment advisers. The Blue Bell
Investment Strategy and the Blue Bell Hedged Strategy can be tailored to meet a client’s
goals of preserving wealth, producing income, or growing wealth, but generally a client in
these strategies will invest using ETFs, CEFs and structured notes and similar investment
vehicles, regardless of their investment profile and their account strategy. Blue Bell
generally recommends a current asset allocation that is more concentrated in structured
notes or similar investment vehicles that seek to preserve their wealth or produce income
and more titled towards ETFs and CEFs for clients that are seeking to grow their wealth.
However, a current asset allocation cannot guarantee that a client will reach their
investment objectives or financial goals. Clients are responsible for notifying Blue Bell of
any changes in their investment objectives or financial situation so that Blue Bell can revisit
the client’s investment profile, current asset allocation, and their investment strategy, and
make modifications, as needed.
RETIREMENT PLAN PARTICIPANT DISCRETIONARY ACCOUNT MANAGEMENT
Blue Bell uses a third-party platform to facilitate discretionary management of held away
assets such as defined contribution plan participant accounts. The platform allows Blue
Bell to avoid being considered to have custody of client funds since the firm does not
have direct access to client log-in credentials to affect trades. Blue Bell is not affiliated
with the platform in any way and receives no compensation for using their platform. A
link will be provided to the client allowing them to connect an account(s) to the platform.
Once the client account(s) is connected to the platform, Blue Bell will review the current
account allocations. When deemed necessary, Blue Bell will rebalance the account
considering client investment goals and risk tolerance, and any change in allocations will
consider current economic and market trends. The goal is to improve account
performance over time, minimize loss during difficult markets, and manage internal fees
that harm account performance. Client account(s) will be reviewed at least quarterly and
allocation changes will be made as deemed necessary. When providing this service, Blue
Bell will be limited to the investment alternatives provided by the retirement plan. Blue
Bell will not have, nor will it accept, any authority to engage in any other type of
transactions or changes to the client’s plan account, including but not limited to changing
beneficiaries or effecting account disbursements or transfers to any individual or entity.
CONSULTING SERVICES
Blue Bell also offers other various consulting services (i.e., estate consulting and
settlement, etc.) Blue Bell will provide consulting services in this manner on a fixed fee or
hourly basis open to reasonable negotiations with the client.
MISCELLANEOUS
Limitations Non-Investment Consulting/Implementation Services. If specifically
requested by the client, Blue Bell may provide consulting services regarding non-
investment related matters, such as estate planning, tax planning, insurance, etc. Blue Bell
does not serve as a law firm, accounting firm, or insurance agency, and no portion of its
services should be construed as legal, accounting, or insurance implementation services.
Accordingly, Blue Bell does not prepare estate planning documents, tax returns or sell
insurance products. To the extent requested by a client, Blue Bell may recommend the
services of other professionals for certain non-investment implementation purposes (i.e.,
attorneys, accountants, insurance, etc.). The client is under no obligation to engage the
services of any such recommended professional. The client retains absolute discretion over
all such implementation decisions and is free to accept or reject any recommendation from
Blue Bell. If the client engages any such recommended professional, and a dispute arises
thereafter relative to such engagement, the client agrees to seek recourse exclusively from
and against the engaged professional.
Non-Discretionary Service Limitations. Clients that determine to engage Blue Bell on a
non-discretionary investment advisory basis must be willing to accept that Blue Bell cannot
affect any account transactions without obtaining prior consent to such transaction(s) from
the client. Therefore, in the event that Blue Bell would like to make a transaction for a
client’s
account (including in the event of an individual holding or general market
correction), and the client is unavailable, Blue Bell will be unable to affect the account
transaction(s) (as it would for its discretionary clients) without first obtaining the client’s
consent.
Sub-Advisory Engagements. Blue Bell may also serve as a sub-adviser to unaffiliated
registered investment advisers per the terms and conditions of a written Sub-Advisory
Agreement. With respect to its sub-advisory services, the unaffiliated investment advisers
that engage Blue Bell to provide sub-advisory services maintain the initial and ongoing
relationship with the underlying client, including the initial and ongoing determination of
suitability. Generally, Schwab will serve as the custodian for all sub-advised accounts. The
other adviser (and not Blue Bell) is responsible for negotiating custody charges and
commission rates for their clients’ accounts. As a result, the underlying client may pay
higher commissions or other transaction costs or greater spreads, or receive less favorable
net prices, on transactions for the account.
Retirement Rollovers-Potential for Conflict of Interest: A client or prospective client
leaving an employer typically has four options regarding an existing retirement plan (and
may engage in a combination of these options): (i) leave the money in the former
employer’s plan, if permitted, (ii) roll over the assets to the new employer’s plan, if one is
available and rollovers are permitted, (iii) roll over to an Individual Retirement Account
(“IRA”), or (iv) cash out the account value (which could, depending upon the client’s age,
result in adverse tax consequences). If Blue Bell recommends that a client roll over their
retirement plan assets into an account to be managed by Blue Bell, such a recommendation
creates a conflict of interest if Blue Bell will earn new (or increase its current)
compensation as a result of the rollover. If Blue Bell provides a recommendation as to
whether a client should engage in a rollover or not (whether it is from an employer’s plan
or an existing IRA), Blue Bell is acting as a fiduciary within the meaning of Title I of the
Employee Retirement Income Security Act and/or the Internal Revenue Code, as
applicable, which are laws governing retirement accounts. No client is under any obligation
to roll over retirement plan assets to an account managed by Blue Bell, whether it is from
an employer’s plan or an existing IRA.
Cross Transactions. In limited circumstances, when determined to be in the best interest
of its clients, Blue Bell may engage in a cross-transaction pursuant to which Blue Bell may
effect transactions between two of its managed client accounts (i.e., arranging for the
clients’ securities trades by “crossing” these trades when Blue Bell believes that such
transactions [generally, thinly traded bonds] are beneficial to its clients). For all such
transactions, neither Blue Bell nor any affiliate will be acting as a broker. Blue Bell will
not receive any commission or transaction-based compensation, although Blue Bell has an
interest in the price at which the cross trades are conducted since Blue Bell’s asset-based
fees will be negatively impacted by lower bond values. This may present a conflict of
interest. These transactions will be generally effected through Fidelity, the account
custodian, or a prime broker. The client may revoke Blue Bell’s cross-transaction authority
at any time upon written notice to Blue Bell.
Structured Notes. A Structured Note is a financial instrument that combines two elements,
a debt security and exposure to an underlying asset or assets. It is essentially a note,
carrying counter party risk of the issuer. However, the return on the note is linked to the
return of an underlying asset or assets (such as the S&P 500 Index or commodities).
Structured notes do not pay interest, dividend payments, provide voting rights or guarantee
any return of principal at maturity unless specifically provided through products that are
designed with this purpose in mind. Most Structured Note payments are based on the
performance of an underlying index (i.e., S&P 500) and if the underlying index were to
decline 100% then the payment may result in a loss of a portion or all of a client’s
principal. Notes are not insured through any governmental agency or program and the
return of principal and fulfillment of the terms negotiated by Blue Bell on behalf of clients
is dependent on the financial condition of the third party issuing the note and the issuer’s
ability to pay its obligations as they become due.
Structured Notes will generally be subject to liquidity constraints, such that the sale thereof
before maturity can be limited. Structured Notes will not be listed on any securities
exchange. There may be no secondary market for Structured Notes held by the client. The
price, if any, at which an issuer will be willing to purchase Structured Notes from clients
in a secondary market transaction, if at all, will likely be lower than the original issue price
and any sale before the maturity date could result in a substantial loss. Structured Notes are
not designed to be short-term trading instruments so clients should be willing to hold any
notes to maturity.
The issuer can generally choose to redeem Structured Notes before maturity. In addition,
the maximum potential payment on Structured Notes will typically be limited to the
redemption amount applicable for a payment date, regardless of the appreciation in the
underlying index associated with the note. Since the level of the underlying index at various
times during the term of the Structured Notes held by clients could be higher than on the
valuation dates and at maturity, clients may receive a lower payment if redeemed early or
at maturity than if a client would have invested directly in the underlying index.
Structured Notes are not insured through any governmental agency or program and the
return of principal and fulfillment of the terms negotiated by Blue Bell on behalf of clients
is dependent on the financial condition of the third party issuing the note and the issuer’s
ability to pay its obligations as they become due. If the issuer of the Structured
Note defaults, the entire value of the investment could be lost.
Cryptocurrency: For clients who want exposure to cryptocurrencies, including Bitcoin,
Blue Bell, will advise the client to consider a potential investment in corresponding
exchange traded securities, or an allocation to separate account managers and/or private
funds that provide cryptocurrency exposure. Crypto is a digital currency that can be used
to buy goods and services but uses an online ledger with strong cryptography (i.e., a
method of protecting information and communications through the use of codes) to secure
online transactions. Unlike conventional currencies issued by a monetary authority,
cryptocurrencies are generally not controlled or regulated and their price is determined by
the supply and demand of their market. Because cryptocurrency is currently considered
to be a speculative investment, Blue Bell will not exercise discretionary authority to
purchase a cryptocurrency investment for client accounts. Rather, a client must expressly
authorize the purchase of the cryptocurrency investment.
Blue Bell does not recommend or advocate the purchase of, or investment in,
cryptocurrencies. Blue Bell considers such an investment to be speculative.
Clients who authorize the purchase of a cryptocurrency investment must be prepared for
the potential for liquidity constraints, extreme price volatility and complete loss of
principal.
Cash Positions. Blue Bell continues to treat cash as an asset class. As such, unless
determined to the contrary by Blue Bell, all cash positions (money markets, etc.) shall
continue to be included as part of assets under management for purposes of calculating
Blue Bell’s advisory fee. At any specific point in time, depending upon perceived or
anticipated market conditions/events (there being no guarantee that such anticipated market
conditions/events will occur), Blue Bell may maintain cash positions for defensive
purposes. In addition, while assets are maintained in cash, such amounts could miss market
advances. Depending upon current yields, at any point in time, Blue Bell’s advisory fee
could exceed the interest paid by the client’s money market fund.
Cash Sweep Accounts. Certain account custodians can require that cash proceeds from
account transactions or new deposits, be swept to and/or initially maintained in a
specific custodian designated sweep account. The yield on the sweep account will
generally be lower than those available for other money market accounts. When this
occurs, to help mitigate the corresponding yield dispersion Blue Bell shall (usually within
30 days thereafter) generally (with exceptions) purchase a higher yielding money market
fund (or other type security) available on the custodian’s platform, unless Blue Bell
reasonably anticipates that it will utilize the cash proceeds during the subsequent 30-day
period to purchase additional investments for the client’s account. Exceptions and/or
modifications can and will occur with respect to all or a portion of the cash balances for
various reasons, including, but not limited to the amount of dispersion between the sweep
account and a money market fund, the size of the cash balance, an indication from the client
of an imminent need for such cash, or the client has a demonstrated history of writing
checks from the account.
The above does not apply to the cash component maintained within a Blue Bell actively
managed investment strategy (the cash balances for which shall generally remain in the
custodian designated cash sweep account), an indication from the client of a need for access
to such cash, assets allocated to an unaffiliated investment manager and cash balances
maintained for fee billing purposes.
The client shall remain exclusively responsible for yield dispersion/cash balance decisions
and corresponding transactions for cash balances maintained in any Blue Bell unmanaged
accounts.
Cybersecurity Risk. The information technology systems and networks that Blue Bell and
its third-party service providers use to provide services to Blue Bell’s clients employ
various controls, which are designed to prevent cybersecurity incidents stemming from
intentional or unintentional actions that could cause significant interruptions in Blue Bell’s
operations and result in the unauthorized acquisition or use of clients’ confidential or non-
public personal information. Clients and Blue Bell are nonetheless subject to the risk of
cybersecurity incidents that could ultimately cause them to incur losses, including for
example: financial losses, cost and reputational damage to respond to regulatory
obligations, other costs associated with corrective measures, and loss from damage or
interruption to systems. Although Blue Bell has established processes to reduce the risk of
cybersecurity incidents, there is no guarantee that these efforts will always be successful,
especially considering that Blue Bell does not directly control the cybersecurity measures
and policies employed by third-party service providers. Clients could incur similar adverse
consequences resulting from cybersecurity incidents that more directly affect issuers of
securities in which those clients invest, broker-dealers, qualified custodians, governmental
and other regulatory authorities, exchange and other financial market operators, or other
financial institutions.
C. Blue Bell provides investment advisory services based on the account’s strategy and the
client’s investment profile as described in greater detail in Item 4.B. Clients may impose
restrictions on investing in certain securities (e.g., a specific ETF or CEF) or types of
securities (e.g., CEFs and options in general). Clients imposing restrictions must make
their requests in writing or as part of their initial onboarding discussions with Blue Bell,
and Blue Bell will confirm with the client whether it accepts the client’s request.
D. Blue Bell does not participate in a wrap fee program.
E. As of December 31, 2023, Blue Bell had $619,164,064 in assets under management on a
discretionary basis and $51,534,176 in assets under management on a non-discretionary
basis.